Bill C-48

If you have any questions or comments regarding the accessibility of this publication, please contact us at accessible@parl.gc.ca.

Complete Document Bilingual view XML PDF

Restrictive Covenants

Definitions

56.4 (1) The following definitions apply in this section.

“eligible corporation”
« société admissible »

“eligible corporation”, of a taxpayer, means a taxable Canadian corporation of which the taxpayer holds, directly or indirectly, shares of the capital stock.

“eligible individual”
« particulier admissible »

“eligible individual”, in respect of a vendor, at any time means an individual (other than a trust) who is related to the vendor and who has attained the age of 18 years at or before that time.

“eligible interest”
« participation admissible »

“eligible interest”, of a taxpayer, means capital property of the taxpayer that is

(a) a partnership interest in a partnership that carries on a business;

(b) a share of the capital stock of a corporation that carries on a business; or

(c) a share of the capital stock of a corporation 90% or more of the fair market value of which is attributable to eligible interests in one other corporation.

“goodwill amount”
« montant pour achalandage »

“goodwill amount”, of a taxpayer, is an amount the taxpayer has or may become entitled to receive that is required by the description of E in the definition “cumulative eligible capital” in subsection 14(5) to be included in computing the cumulative eligible capital of a business carried on by the taxpayer through a permanent establishment located in Canada.

“permanent establishment”
« établissement stable »

“permanent establishment” means a permanent establishment as defined for the purpose of subsection 16.1(1).

“restrictive covenant”
« clause restrictive »

“restrictive covenant”, of a taxpayer, means an agreement entered into, an undertaking made, or a waiver of an advantage or right by the taxpayer, whether legally enforceable or not, that affects, or is intended to affect, in any way whatever, the acquisition or provision of property or services by the taxpayer or by another taxpayer that does not deal at arm’s length with the taxpayer, other than an agreement or undertaking

(a) that disposes of the taxpayer’s property; or

(b) that is in satisfaction of an obligation described in section 49.1 that is not a disposition except where the obligation being satisfied is in respect of a right to property or services that the taxpayer acquired for less than its fair market value.

“taxpayer”
« contribuable »

“taxpayer” includes a partnership.

Income — restrictive covenants

(2) There is to be included in computing a taxpayer’s income for a taxation year the total of all amounts each of which is an amount in respect of a restrictive covenant of the taxpayer that is received or receivable in the taxation year by the taxpayer or by a taxpayer with whom the taxpayer does not deal at arm’s length (other than an amount that has been included in computing the taxpayer’s income because of this subsection for a preceding taxation year or in the taxpayer’s eligible corporation’s income because of this subsection for the taxation year or a preceding taxation year).

Non-application of subsection (2)

(3) Subsection (2) does not apply to an amount received or receivable by a particular taxpayer in a taxation year in respect of a restrictive covenant granted by the particular taxpayer to another taxpayer (referred to in this subsection and subsection (4) as the “purchas-er”) with whom the particular taxpayer deals at arm’s length (determined without reference to paragraph 251(5)(b)), if

(a) section 5 or 6 applied to include the amount in computing the particular taxpayer’s income for the taxation year or would have so applied if the amount had been received in the taxation year;

(b) the amount would, if this Act were read without reference to this section, be required by the description of E in the definition “cumulative eligible capital” in subsection 14(5) to be included in computing the particular taxpayer’s cumulative eligible capital in respect of the business to which the restrictive covenant relates, and the particular taxpayer elects (or if the amount is payable by the purchaser in respect of a business carried on in Canada by the purchaser, the particular taxpayer and the purchaser jointly elect) in prescribed form to apply this paragraph in respect of the amount; or

(c) subject to subsection (9), the amount directly relates to the particular taxpayer’s disposition of property that is, at the time of the disposition, an eligible interest in the partnership or corporation that carries on the business to which the restrictive covenant relates, or that is at that time an eligible interest by virtue of paragraph (c) of the definition “eligible interest” in subsection (1) where the other corporation referred to in that paragraph carries on the business to which the restrictive covenant relates, and

(i) the disposition is to the purchaser (or to a person related to the purchaser),

(ii) the amount is consideration for an undertaking by the particular taxpayer not to provide, directly or indirectly, property or services in competition with the property or services provided or to be provided by the purchaser (or by a person related to the purchaser),

(iii) the restrictive covenant may reasonably be considered to have been granted to maintain or preserve the value of the eligible interest disposed of to the purchaser;

(iv) if the restrictive covenant is granted on or after July 18, 2005, subsection 84(3) does not apply to the disposition,

(v) the amount is added to the particular taxpayer’s proceeds of disposition, as defined by section 54, for the purpose of applying this Act to the disposition of the particular taxpayer’s eligible interest, and

(vi) the particular taxpayer and the purchaser elect in prescribed form to apply this paragraph in respect of the amount.

Treatment of purchaser

(4) An amount paid or payable by a purchaser for a restrictive covenant is

(a) if the amount is required because of section 5 or 6 to be included in computing the income of an employee of the purchaser, to be considered to be wages paid or payable by the purchaser to the employee;

(b) if an election has been made under paragraph (3)(b) in respect of the amount, to be considered to be incurred by the purchaser on account of capital for the purpose of applying the definition “eligible capital expenditure” in subsection 14(5) and not to be an amount paid or payable for all other purposes of the Act; and

(c) if an election has been made under paragraph (3)(c), in respect of the amount and the amount relates to the purchaser’s acquisition of property that is, immediately after the acquisition, an eligible interest of the purchaser, to be included in computing the cost to the purchaser of that eligible interest and considered not to be an amount paid or payable for all other purposes of the Act.

Non-application of section 68

(5) If this subsection applies to a restrictive covenant granted by a taxpayer, section 68 does not apply to deem consideration to be received or receivable by the taxpayer for the restrictive covenant.

Application of subsection (5) — if employee provides covenant

(6) Subsection (5) applies to a restrictive covenant if

(a) the restrictive covenant is granted by an individual to another taxpayer with whom the individual deals at arm’s length (referred to in this subsection as the “purchaser”);

(b) the restrictive covenant directly relates to the acquisition from one or more other persons (in this subsection and subsection (12) referred to as the “vendors”) by the purchaser of an interest, or for civil law purposes a right, in the individual’s employer, in a corporation related to that employer or in a business carried on by that employer;

(d) the restrictive covenant is an undertaking by the individual not to provide, directly or indirectly, property or services in competition with property or services provided or to be provided by the purchaser (or by a person related to the purchaser) in the course of carrying on the business to which the restrictive covenant relates;

(e) no proceeds are received or receivable by the individual for granting the restrictive covenant; and

(f) the amount that can reasonably be regarded to be consideration for the restrictive covenant is received or receivable only by the vendors.

Application of subsection (5) — realization of goodwill amount and disposition of property

(7) Subject to subsection (10), subsection (5) applies to a restrictive covenant granted by a taxpayer if

(a) the restrictive covenant is granted by the taxpayer (in this subsection and subsection (8) referred to as the “vendor”) to

(i) another taxpayer (in this subsection referred to as the “purchaser”) with whom the vendor deals at arm’s length (determined without reference to paragraph 251(5)(b)) at the time of the grant of the restrictive covenant, or

(ii) another person who is an eligible individual in respect of the vendor at the time of the grant of the restrictive covenant;

(b) where subparagraph (a)(i) applies, the restrictive covenant is an undertaking of the vendor not to provide, directly or indirectly, property or services in competition with the property or services provided or to be provided by the purchaser (or by a person related to the purchaser) in the course of carrying on the business to which the restrictive covenant relates, and

(i) the amount that can reasonably be regarded as being consideration for the restrictive covenant is

(A) included by the vendor in computing a goodwill amount of the vendor, or

(B) received or receivable by a corporation that was an eligible corporation of the vendor when the restrictive covenant was granted and included by the eligible corporation in computing a goodwill amount of the eligible corporation in respect of the business to which the restrictive covenant relates, or

(ii) it is reasonable to conclude that the restrictive covenant is integral to an agreement in writing,

(A) under which the vendor or the vendor’s eligible corporation disposes of property (other than property described in clause (B)) to the purchaser, or the purchaser’s eligible corporation, for consideration that is received or receivable by the vendor, or the vendor’s eligible corporation, as the case may be, or

(B) under which shares of the capital stock of a corporation (in this subsection and subsection (12) referred to as the “target corporation”) are disposed of to the purchaser or to another person that is related to the purchaser and with whom the vendor deals at arm’s length (determined without reference to paragraph 251(5)(b)),

(c) where subparagraph (a)(ii) applies, the restrictive covenant is an undertaking of the vendor not to provide, directly or indirectly, property or services in competition with the property or services provided or to be provided by the eligible individual (or by an eligible corporation of the eligible individual) in the course of carrying on the business to which the restrictive covenant relates, and

(i) either

(A) the amount that can reasonably be regarded as being consideration for the restrictive covenant is

(I) included by the vendor in computing a goodwill amount of the vendor, or

(II) received or receivable by a corporation that was an eligible corporation of the vendor when the restrictive covenant was granted and included by the eligible corporation in computing a goodwill amount of the eligible corporation in respect of the business to which the restrictive covenant relates, or

(B) it is reasonable to conclude that the restrictive covenant is integral to an agreement in writing

(I) under which the vendor or the vendor’s eligible corporation disposes of property (other than property described in subclause (II)) to the eligible individual, or eligible individ-ual’s eligible corporation, for consideration that is received or receivable by the vendor, or the vendor’s eligible corporation, as the case may be, or

(II) under which shares of the capital stock of the vendor’s eligible corporation (in this subsection and subsection (12) referred to as the “family corporation”) are disposed of to the eligible individual or the eligible individual’s eligible corporation,

(ii) the vendor is resident in Canada at the time of the grant of the restrictive covenant and the disposition referred to in clause (i)(B), and

(iii) the vendor does not, at any time after the grant of the restrictive covenant and whether directly or indirectly in any manner whatever, have an interest, or for civil law a right, in the family corporation or in the eligible corporation of the eligible individual, as the case may be;

(d) no proceeds are received or receivable by the vendor for granting the restrictive covenant;

(e) subsection 84(3) does not apply in respect of the disposition of a share of the target corporation or family corporation, as the case may be;

(f) the restrictive covenant can reasonably be regarded to have been granted to maintain or preserve the fair market value of any of

(i) the benefit of the expenditure derived from the goodwill amount referred to in subparagraph (b)(i) or clause (c)(i)(A) and for which a joint election referred to in paragraph (g) was made,

(ii) the property referred to in clause (b)(ii)(A) or subclause (c)(i)(B)(I), or

(iii) the shares referred to in clause (b)(ii)(B) or subclause (c)(i)(B)(II); and

(g) a joint election in prescribed form to apply subsection (5) to the amount referred to in subparagraph (b)(i) or clause (c)(i)(A), if otherwise applicable, is made by

(i) in the case of subparagraph (b)(i), the vendor, or the vendor’s eligible corporation if it is required to include the goodwill amount in computing its income, and the purchaser, or the purchaser’s eligible corporation if it incurs the expenditure that is the goodwill amount to the vendor or the vendor’s eligible corporation, as the case may be, or

(ii) in the case of clause (c)(i)(A), the vendor, or the vendor’s eligible corporation if it is required to include the goodwill amount in computing its income, and the eligible individual, or the eligible individ-ual’s eligible corporation if it incurs the expenditure that is the goodwill amount to the vendor or the vendor’s eligible corporation, as the case may be.

Application of subsection (7) and section 69 — special rules

(8) For the purpose

(a) of applying subsection (7), clause (7)(b)(ii)(A) and subclause (7)(c)(i)(B)(I) apply to a grant of a restrictive covenant only if

(i) the consideration that can reasonably be regarded as being in part the consideration for the restrictive covenant is received or receivable by the vendor or the vendor’s eligible corporation, as the case may be, as consideration for the disposition of the property, and

(ii) if all or a part of the consideration can reasonably be regarded as being for a goodwill amount, subsection (2), paragraph (3)(b), subparagraph (7)(b)(i) or clause (7)(c)(i)(A) applies to that consideration; and

(b) of determining if the conditions described in paragraph (7)(c) have been met, and for the purpose of applying section 69, in respect of a restrictive covenant granted by a vendor, the fair market value of a property is the amount that can reasonably be regarded as being the fair market value of the property if the restrictive covenant were part of the property.

Anti-avoidance rule — non-application of paragraph (3)(c)

(9) Paragraph (3)(c) does not apply to an amount that would, if this Act were read without reference to subsections (2) to (14), be included in computing a taxpayer’s income from a source that is an office or employment or a business or property under paragraph 3(a).

Anti-avoidance — non-application of subsection (7)

(10) Subsection (7) does not apply in respect of a taxpayer’s grant of a restrictive covenant if one of the results of not applying section 68 to the consideration received or receivable in respect of the taxpayer’s grant of the restrictive covenant would be that paragraph 3(a) would not apply to consideration that would, if this Act were read without reference to subsections (2) to (14), be included in computing a taxpayer’s income from a source that is an office or employment or a business or property.

Clarification if subsection (2) applies — where another person receives the amount

(11) For greater certainty, if subsection (2) applies to include in computing a taxpayer’s income an amount received or receivable by another taxpayer, that amount is not to be included in computing the income of that other taxpayer.

Clarification if subsection (5) applies

(12) For greater certainty, if subsection (5) applies in respect of a restrictive covenant,

(a) the amount referred to in paragraph (6)(f) is to be added in computing the amount received or receivable by the vendors as consideration for the disposition of the interest or right referred to in paragraph (6)(b); and

(b) the amount that can reasonably be regarded as being in part consideration received or receivable for a restrictive covenant to which clause (7)(b)(ii)(B) or subclause (7)(c)(i)(B)(II) applies is to be added in computing the consideration that is received or receivable by each taxpayer who disposes of shares of the target corporation, or shares of the family corporation, as the case may be, to the extent of the portion of the consideration that is received or receivable by that taxpayer.

Filing of prescribed form

(13) For the purpose of paragraphs (3)(b) and (c) and subsection (7), an election in prescribed form filed under any of those provisions is to include a copy of the restrictive covenant and be filed

(a) if the person who granted the restrictive covenant was a person resident in Canada when the restrictive covenant was granted, by the person with the Minister on or before the person’s filing-due date for the taxation year that includes the day on which the restrictive covenant was granted; and

(b) in any other case, with the Minister on or before the day that is six months after the day on which the restrictive covenant is granted.

Non-application of section 42

(14) Section 42 does not apply to an amount received or receivable as consideration for a restrictive covenant.

(2) Subject to subsections (3) to (6), subsection (1) applies to

(a) amounts received or receivable by a taxpayer after October 7, 2003 other than to amounts received by the taxpayer before 2005 under a grant of a restrictive covenant made in writing on or before October 7, 2003 between the taxpayer and a purchaser with whom the taxpayer deals at arm’s length; and

(b) amounts paid or payable by a purchas-er after October 7, 2003 other than to amounts paid or payable by the purchaser before 2005 under a grant of a restrictive covenant made in writing on or before October 7, 2003 between the purchaser and a taxpayer with whom the purchaser deals at arm’s length.

(3) For the purpose of applying subsection (1) to a restrictive covenant granted by a taxpayer before November 9, 2006,

(a) paragraph (b) of the definition “restrictive covenant” in subsection 56.4(1) of the Act, as enacted by subsection (1), is to be read as follows:

(b) that is in satisfaction of an obligation described in section 49.1 that is not a disposition.

(b) paragraph 56.4(3)(c) of the Act, as enacted by subsection (1), applies as enacted unless the taxpayer elects, no later than 180 days after the day on which this Act receives royal assent, by filing with the Minister of National Revenue an election in writing, that this paragraph apply, in which case paragraph 56.4(3)(c) of the Act, as enacted by subsection (1), is to be read in respect of the restrictive covenant as follows:

(c) the amount directly relates to the partic-ular taxpayer’s disposition of property that is, at the time of the disposition, an eligible interest in the partnership or corporation that carries on the business to which the restrictive covenant relates, or that is at that time an eligible interest by virtue of paragraph (c) of the definition “eligible interest” in subsection (1) where the other corporation referred to in that paragraph carries on the business to which the restrictive covenant relates, and

(i) the disposition is to the purchaser (or to a person related to the purchaser),

(iii) the amount does not exceed the amount determined by the formula

A – B

where

A is the amount that would be the fair market value of the particular taxpayer’s eligible interest that is disposed of if all restrictive covenants that may reasonably be considered to relate to a disposition of an interest, or for civil law purposes a right, in the business by any taxpayer were provided for no consideration, and

B is the amount that would be the fair market value of the particular taxpayer’s eligible interest that is disposed of if no covenant were granted by any taxpayer that held an interest, or for civil law purposes a right, in the business,

(iv) if the restrictive covenant is granted on or after July 18, 2005, subsection 84(3) does not apply to the disposition,

(vi) the particular taxpayer and the purchaser elect in prescribed form to apply this paragraph in respect of the amount.

(4) For the purpose of applying subsection (1) to a restrictive covenant, an election referred to in subsection 56.4(13) of the Act, as enacted by subsection (1), is deemed to be filed on a timely basis if it is filed on or before the later of the day that it is otherwise required to be filed and the day that is 180 days after the day on which this Act receives royal assent.

(5) For the purpose of applying subsection (1) to a restrictive covenant granted by a taxpayer on or before July 16, 2010,

(a) paragraph 56.4(7)(d) of the Act, as enacted by subsection (1), is to be read as follows:

(d) for the purpose of applying subparagraph (7)(b)(i) and paragraph (7)(c), no proceeds are received or receivable by the vendor for granting the restrictive covenant; and

(b) paragraph 56.4(8)(a) of the Act, as enacted by subsection (1), is to be read as follows:

(a) of applying subsection (7), clause (7)(b)(ii)(A) and subclause (7)(c)(i)(B)(I) do not apply to a grant of a restrictive covenant unless the consideration, that can reasonably be regarded as being in part the consideration for the restrictive covenant, is received or receivable by the vendor or the vendor’s eligible corporation, as the case may be, as consideration for the disposition of the property;

(6) For the purpose of applying subsection (1) to a restrictive covenant granted by a taxpayer on or before October 24, 2012,

(a) subparagraph 56.4(7)(f)(i) of the Act, as enacted by subsection (1), is to be read as follows:

(i) the benefit of the expenditure made by the taxpayer derived from the goodwill amount referred to in subparagraph (b)(i) or clause (c)(i)(A),

(b) subsection 56.4(7) of the Act, as enacted by subsection (1), is to be read without reference to paragraph (g).

196. (1) Section 60 of the Act is amended by adding the following after paragraph (e):

Restrictive covenant — bad debt

(f) all debts owing to a taxpayer that are established by the taxpayer to have become bad debts in the taxation year and that are in respect of an amount included because of the operation of subsection 6(3.1) or 56.4(2) in computing the taxpayer’s income in a preceding taxation year;

Quebec parental insurance plan — self-employed premiums

(g) the amount determined by the formula

A – B

where

A is the total of all amounts each of which is an amount payable by the taxpayer in respect of self-employed earnings for the taxation year as a premium under the Act respecting parental insurance, R.S.Q., c. A-29.011, and

B is the total of all amounts each of which is an amount that would be payable by the taxpayer as an employee’s premium under the Act respecting parental insurance, R.S.Q., c. A-29.011, if those earnings were employment income of the taxpayer for the taxation year;

(2) Clause 60(l)(ii)(B) of the Act is replaced by the following:

(B) under which the taxpayer is the annuitant for a term not exceeding 18 years minus the age in whole years of the taxpayer at the time the annuity was acquired

(3) Paragraph 60(n) of the Act is amended by striking out “and” at the end of subparagraph (v) and by adding the following after subparagraph (v):

(v.1) a benefit described in subparagraph 56(1)(a)(vii), and

(4) Section 60 of the Act is amended by adding the following after paragraph (n):

Repayment of pension benefits

(n.1) an amount paid by the taxpayer in the year to a registered pension plan if

(i) the taxpayer is an individual,

(ii) the amount is paid as

(A) a repayment of an amount received from the plan that was included in computing the taxpayer’s income for the year or a preceding year, if

(I) it is reasonable to consider that the amount was paid under the plan as a consequence of an error and not as an entitlement to benefits, or

(II) it was subsequently determined that, as a consequence of a settlement of a dispute in respect of the taxpayer’s employment, the taxpayer was not entitled to the amount, or

(B) interest in respect of a repayment described in clause (A), and

(iii) no portion of the amount is deductible under paragraph 8(1)(m) in computing the taxpayer’s income for the year;

(5) Paragraph 60(p) of the Act is replaced by the following:

Repayment of apprenticeship grants

(p) the total of all amounts each of which is an amount paid in the taxation year as a repayment under the Apprenticeship Incentive Grant program or the Apprenticeship Completion Grant program of an amount that was included under paragraph 56(1)(n.1) in computing the taxpayer’s income for the taxation year or a preceding taxation year;

(6) Paragraph 60(f) of the Act, as enacted by subsection (1), is deemed to have come into force on October 8, 2003.

(7) Paragraph 60(g) of the Act, as enacted by subsection (1), and subsection (3) apply to the 2006 and subsequent taxation years.

(8) Subsection (2) is deemed to have come into force on January 1, 1989.

(9) Subsection (4) applies to the 2009 and subsequent taxation years.

(10) Subsection (5) applies to 2009 and subsequent years.

197. (1) The Act is amended by adding the following after section 60.01:

Meaning of “lifetime benefit trust”

60.011 (1) For the purpose of subsection (2), a trust is at any particular time a lifetime benefit trust with respect to a taxpayer and the estate of a deceased individual if

(a) immediately before the death of the deceased individual, the taxpayer

(i) was both a spouse or common-law partner of the deceased individual and mentally infirm, or

(ii) was both a child or grandchild of the deceased individual and dependent on the deceased individual for support because of mental infirmity; and

(b) the trust is, at the particular time, a personal trust under which

(i) no person other than the taxpayer may receive or otherwise obtain the use of, during the taxpayer’s lifetime, any of the income or capital of the trust, and

(ii) the trustees

(A) are empowered to pay amounts from the trust to the taxpayer, and

(B) are required — in determining whether to pay, or not to pay, an amount to the taxpayer — to consider the needs of the taxpayer including, without limiting the generality of the foregoing, the comfort, care and maintenance of the taxpayer.

Meaning of “qualifying trust annuity”

(2) Each of the following is a qualifying trust annuity with respect to a taxpayer:

(a) an annuity that meets the following conditions:

(i) it is acquired after 2005,

(ii) the annuitant under it is a trust that is, at the time the annuity is acquired, a lifetime benefit trust with respect to the taxpayer and the estate of a deceased individual,

(iii) it is for the life of the taxpayer (with or without a guaranteed period), or for a fixed term equal to 90 years minus the age in whole years of the taxpayer at the time it is acquired, and

(iv) if it is with a guaranteed period or for a fixed term, it requires that, in the event of the death of the taxpayer during the guaranteed period or fixed term, any amounts that would otherwise be payable after the death of the taxpayer be commuted into a single payment;

(b) an annuity that meets the following conditions:

(i) it is acquired after 1988,

(ii) the annuitant under it is a trust under which the taxpayer is the sole person beneficially interested (determined without regard to any right of a person to receive an amount from the trust only on or after the death of the taxpayer) in amounts payable under the annuity,

(iii) it is for a fixed term not exceeding 18 years minus the age in whole years of the taxpayer at the time it is acquired, and

(iv) if it is acquired after 2005, it requires that, in the event of the death of the taxpayer during the fixed term, any amounts that would otherwise be payable after the death of the taxpayer be commuted into a single payment; and

(i) it is acquired

(A) after 2000 and before 2005 at a time at which the taxpayer was mentally or physically infirm, or

(B) in 2005 at a time at which the taxpayer was mentally infirm,

(iii) it is for the life of the taxpayer (with or without a guaranteed period), or for a fixed term equal to 90 years minus the age in whole years of the taxpayer at the time it is acquired.

Application of paragraph 60(l) to “qualifying trust annuity”

(3) For the purpose of paragraph 60(l),

(a) in determining if a qualifying trust annuity with respect to a taxpayer is an annuity described in subparagraph 60(l)(ii), clauses 60(l)(ii)(A) and (B) are to be read without regard to their requirement that the taxpayer be the annuitant under the annuity; and

(b) if an amount paid to acquire a qualifying trust annuity with respect to a taxpayer would, if this Act were read without reference to this subsection, not be considered to have been paid by or on behalf of the taxpayer, the amount is deemed to have been paid on behalf of the taxpayer where

(i) it is paid

(A) by the estate of a deceased indi-vidual who was, immediately before death,

(I) a spouse or common-law partner of the taxpayer, or

(II) a parent or grandparent of the taxpayer on whom the taxpayer was dependent for support, or

(B) by the trust that is the annuitant under the qualifying trust annuity, and

(ii) it would, if it had been paid by the taxpayer, be deductible under paragraph 60(l) in computing the taxpayer’s income for a taxation year and the taxpayer elects, in the taxpayer’s return of income under this Part for that taxation year, to have this paragraph apply to the amount.

(2) Subsection (1) is deemed to have come into force on January 1, 1989 and, for the purpose of applying subparagraph 60.011(3)(b)(ii) of the Act, as enacted by subsection (1), to a taxation year that ends before 2005, a taxpayer is deemed to have made the election referred to in that subparagraph in respect of an amount paid to acquire a qualifying trust annuity if the taxpayer claimed, in their return of income for that taxation year, an amount as a deduction under paragraph 60(l) of the Act in respect of the amount paid to acquire the qualifying trust annuity.

198. (1) The portion of clause (i)(B) of the description of C in paragraph 63(2)(b) of the Act before subclause (I) is replaced by the following:

(B) a person certified in writing by a medical doctor to be a person who

(2) Subsection (1) applies to certifications made after December 20, 2002.

199. (1) The portion of subsection 66(12.6) of the Act before paragraph (a) is replaced by the following:

Canadian exploration expenses to flow-through shareholder

(12.6) If a person gave consideration under an agreement to a corporation for the issue of a flow-through share of the corporation and, in the period that begins on the day on which the agreement was made and ends 24 months after the end of the month that includes that day, the corporation incurred Canadian exploration expenses (other than an expense deemed by subsection 66.1(9) to be a Canadian exploration expense of the corporation), the corporation may, after it complies with subsection (12.68) in respect of the share and before March of the first calendar year that begins after the period, renounce, effective on the day on which the renunciation is made or on an earlier day set out in the form prescribed for the purpose of subsection (12.7), to the person in respect of the share the amount, if any, by which the portion of those expenses that was incurred on or before the effective date of the renunciation (which portion is in this subsection referred to as the “specified expenses”) exceeds the total of

(2) The portion of subsection 66(12.63) of the Act before paragraph (a) is replaced by the following:

Effect of renunciation

(12.63) Subject to subsections (12.69) to (12.702), if under subsection (12.62) a corporation renounces an amount to a person,

(3) The portion of subsection 66(12.66) of the French version of the Act before paragraph (b) is replaced by the following:

Frais engagés dans l’année suivante

(12.66) Pour l’application du paragraphe (12.6) et pour l’application du paragraphe (12.601) et de l’alinéa (12.602)b), la société qui émet une action accréditive à une personne conformément à une convention est réputée avoir engagé des frais d’exploration au Canada ou des frais d’aménagement au Canada le dernier jour de l’année civile précédant une année civile donnée si les conditions ci-après sont réunies :

a) la société engage les frais au cours de l’année donnée;

a.1) la convention a été conclue au cours de l’année précédente;

(4) Subparagraph 66(12.66)(b)(iii) of the French version of the Act is replaced by the following:

(iii) seraient des dépenses visées à l’alinéa f) de la définition de « frais d’aménagement au Canada » au paragraphe 66.2(5) si le passage « à l’un des alinéas a) à e) » était remplacé par « aux alinéas a) ou b) »;

(5) The portion of subsection 66(12.66) of the English version of the Act after paragraph (e) is replaced by the following:

the corporation is, for the purpose of subsection (12.6), or of subsection (12.601) and paragraph (12.602)(b), as the case may be, deemed to have incurred the expenses on the last day of that preceding year.

(6) The definition “flow-through share” in subsection 66(15) of the Act is replaced by the following:

“flow-through share”
« action accréditive »

“flow-through share” means a share (other than a prescribed share) of the capital stock of a principal-business corporation, or a right (other than a prescribed right) to acquire a share of the capital stock of a principal-business corporation, issued to a person under an agreement in writing made between the person and the corporation under which the corporation, for consideration that does not include property to be exchanged or transferred by the person under the agreement in circumstances to which any of sections 51, 85, 85.1, 86 and 87 applies, agrees

(a) to incur, in the period that begins on the day on which the agreement was made and ends 24 months after the month that includes that day, Canadian exploration expenses or Canadian development expenses in an amount not less than the consideration for which the share or right is to be issued, and

(b) to renounce, in prescribed form and before March of the first calendar year that begins after that period, to the person in respect of the share or right, an amount in respect of the Canadian exploration expenses or Canadian development expenses so incurred by it not exceeding the consideration received by the corporation for the share or right;

(7) Subsection 66(18) of the Act is replaced by the following:

Members of partnerships

(18) For the purposes of this section, subsection 21(2), sections 59.1 and 66.1 to 66.7, paragraph (d) of the definition “investment expense” in subsection 110.6(1), the definition “pre-production mining expenditure” in subsection 127(9) and the descriptions of C and D in subsection 211.91(1), where a person’s share of an outlay or expense made or incurred by a partnership in a fiscal period of the partnership is included in respect of the person under paragraph (d) of the definition “foreign exploration and development expenses” in subsection (15), paragraph (h) of the definition “Canadian exploration expense” in subsection 66.1(6), paragraph (f) of the definition “Canadian development expense” in subsection 66.2(5), paragraph (e) of the definition “foreign resource expense” in subsection 66.21(1) or paragraph (b) of the definition “Canadian oil and gas property expense” in subsection 66.4(5), the portion of the outlay or expense so included is deemed, except for the purposes of applying the definitions “foreign exploration and development expenses”, “Canadian exploration expense”, “Canadian development expense”, “foreign resource expense” and “Canadian oil and gas property expense” in respect of the person, to be made or incurred by the person at the end of that fiscal period.

(8) Subsections (1) and (2) apply to renunciations made after December 20, 2002.

(9) Subsection (3) applies to expenses incurred after 1996, except that

(a) subsection (3) does not apply to expenses incurred in January or February 1997 in respect of an agreement that was made in 1995; and

(b) for the purpose of applying paragraph 66(12.66)(a.1) of the French version of the Act, as enacted by subsection (3), to expenses incurred in 1998, any agreement made in 1996 is deemed to have been made in 1997.

(10) Subsection (6) applies to agreements made after December 20, 2002.

(11) Subsection (7) applies to expenses incurred in fiscal periods that begin after 2001.

200. (1) The description of B in the definition “cumulative Canadian exploration expense” in subsection 66.1(6) of the Act is replaced by the following:

B is the total of all amounts that were, because of subsection (1), included in computing the amount referred to in paragraph 59(3.2)(b) for the taxpayer’s taxation years ending before that time,

(2) Section 66.1 of the Act is amended by adding the following after subsection (6.1):

Deductible expense

(6.2) An expense of a taxpayer that is not included in paragraph (f) or (g) of the definition “Canadian exploration expense” in subsection (6) because the taxpayer earned revenue from a mine in a mineral resource is deemed, for the purposes of this Part, not to be an outlay or payment described in paragraph 18(1)(b).

(3) Subsection (1) applies to taxation years that end after November 5, 2010.

(4) Subsection (2) applies in respect of expenses incurred after November 5, 2010.

201. (1) Paragraph (e) of the definition “Canadian development expense” in subsection 66.2(5) of the Act is replaced by the following:

(e) the cost to the taxpayer of, including any payment for the preservation of a taxpayer’s rights in respect of, any property described in paragraph (b), (e) or (f) of the definition “Canadian resource property” in subsection 66(15), or any right to or interest in – or for civil law, any right in or to – the property (other than a right or an interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership),

(2) The description of B in the definition “cumulative Canadian development expense” in subsection 66.2(5) of the Act is replaced by the following:

B is the total of all amounts that were, because of subsection (1), included in computing the amount referred to in paragraph 59(3.2)(c) for taxation years ending before that time,

(3) Subsection (1) applies to taxation years that begin after 2006, except that in its application to taxation years that begin in 2007, paragraph (e) of the definition “Canadian development expense” in subsection 66.2(5) of the Act, as enacted by subsection (1), is to be read as follows:

(e) notwithstanding paragraph 18(1)(m), the cost to the taxpayer of, including any payment for the preservation of a taxpayer’s rights in respect of, any property described in paragraph (b), (e) or (f) of the definition “Canadian resource property” in subsection 66(15), or any right to or interest in – or for civil law, any right in or to – the property (other than a right or an interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership), but not including any payment made to any of the persons referred to in subparagraph 18(1)(m)(i) for the preservation of a taxpayer’s right in respect of a Canadian resource property, nor a payment to which paragraph 18(1)(m) applied because of clause 18(1)(m)(ii)(B),

(4) Subsection (2) applies to taxation years that end after November 5, 2010.

202. (1) The formula in the definition “cumulative foreign resource expense” in subsection 66.21(1) of the Act is replaced by the following:

(A + A.1 + B + C + D) – (E + F + G + H + I + J)

(2) The definition “cumulative foreign resource expense” in subsection 66.21(1) of the Act is amended by adding the following after the description of A:

A.1 is the total of all foreign resource expenses, in respect of that country, that is the cost to the taxpayer of any of the taxpayer’s foreign resource property in respect of that country that is deemed to have been acquired by the taxpayer under paragraph 128.1(1)(c) at the last time (before the particular time) that the taxpayer became resident in Canada;

(3) The description of B in the definition “cumulative foreign resource expense” in subsection 66.21(1) of the Act is replaced by the following:

B is the total of all amounts included in computing the amount referred to in paragraph 59(3.2)(c.1) in respect of that country, for taxation years that ended before the particular time and at a resident time;

(4) Subsections (1) and (2) are deemed to have come into force on January 1, 2005.

(5) Subsection (3) applies to taxation years that end after November 5, 2010.

203. (1) Paragraph (a) of the definition “Canadian oil and gas property expense” in subsection 66.4(5) of the Act is replaced by the following:

(a) the cost to the taxpayer of, including any payment for the preservation of a taxpayer’s rights in respect of, any property described in paragraph (a), (c) or (d) of the definition “Canadian resource property” in subsection 66(15) or any right to or interest in — or, for civil law, any right in or to — the property (other than a right or an interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership), or an amount paid to Her Majesty in right of the Province of Saskatchewan as a net royalty payment pursuant to a net royalty petroleum and natural gas lease that was in effect on March 31, 1977 to the extent that it can reasonably be regarded as a cost of acquiring the lease,

(2) Subsection (1) applies to taxation years that begin after 2006, except that in its application to the taxation years that begin in 2007, paragraph (a) of the definition “Canadian oil and gas property expense” in subsection 66.4(5) of the Act, as enacted by subsection (1), is to be read as follows:

(a) notwithstanding paragraph 18(1)(m), the cost to the taxpayer of, including any payment for the preservation of a taxpayer’s rights in respect of, any property described in paragraph (a), (c) or (d) of the definition “Canadian resource property” in subsection 66(15) or any right to or interest in — or, for civil law, any right in or to — the property (other than a right or an interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership), or an amount paid or payable to Her Majesty in right of the Province of Saskatchewan as a net royalty payment pursuant to a net royalty petroleum and natural gas lease that was in effect on March 31, 1977 to the extent that it can reasonably be regarded as a cost of acquiring the lease, but not including any payment made to any of the persons re-ferred to in subparagraph 18(1)(m)(i) for the preservation of a taxpayer’s right in respect of a Canadian resource property, nor a payment (other than a net royalty payment referred to in this paragraph) to which paragraph 18(1)(m) applied because of clause 18(1)(m)(ii)(B),

204. (1) Section 66.7 of the Act is amended by adding the following after subsection (10):

Amalgamation — partnership property

(10.1) For the purposes of subsections (1) to (5) and the definition “original owner” in subsection 66(15), if at any particular time there has been an amalgamation within the meaning assigned by subsection 87(1), other than an amalgamation to which subsection 87(1.2) applies, of two or more corporations (each of which is referred to in this subsection as a “predecessor corporation”) to form one corporate entity (referred to in this subsection as the “new corporation”) and immediately before the particular time a predecessor corporation was a member of a partnership that owned a Canadian resource property or a foreign resource property,

(a) the predecessor corporation is deemed

(i) to have owned, immediately before the particular time, that portion of each Canadian resource property and of each foreign resource property owned by the partnership at the particular time that is equal to the predecessor corporation’s percentage share of the total of the amounts that would be paid to all members of the partnership if the partnership were wound up immediately before the particular time, and

(ii) to have disposed of those portions to the new corporation at the particular time;

(b) the new corporation is deemed to have, by way of the amalgamation, acquired those portions at the particular time; and

(c) the income of the new corporation for a taxation year that ends after the particular time that can reasonably be attributable to production from those properties is deemed to be the lesser of

(i) the new corporation’s share of the part of the income of the partnership for fiscal periods of the partnership that end in the year that can reasonably be regarded as being attributable to production from those properties, and

(ii) the amount that would be determined under subparagraph (i) for the year if the new corporation’s share of the income of the partnership for the fiscal periods of the partnership that end in the year were determined on the basis of the percentage share referred to in paragraph (a).

(2) Subsection 66.7(16) of the Act is replaced by the following:

Non-successor acquisitions

(16) If at any time a Canadian resource property or a foreign resource property is acquired by a person in circumstances in which none of subsections (1) to (5), nor subsection 29(25) of the Income Tax Application Rules, apply, every person who was an original owner or predecessor owner of the property before that time is, for the purpose of applying those subsections to or in respect of the person or any other person who after that time acquires the property, deemed after that time not to be an original owner or predecessor owner of the property before that time.

(3) Subsection (1) applies to amalgamations that occur after 1996.

(4) Subsection (2) applies to property acquired after November 5, 2010.

205. (1) Paragraph 66.8(3)(a) of the Act is replaced by the following:

(a) the expression “limited partner” of a partnership has the meaning that would be assigned by subsection 96(2.4), if in subsection 96(2.5) each reference to

(i) “February 25, 1986” were a reference to “June 17, 1987”,

(ii) “February 26, 1986” were a reference to “June 18, 1987”,

(iii) “January 1, 1987” were a reference to “January 1, 1988”,

(iv) “June 12, 1986” were a reference to “June 18, 1987”, and

(v) “prospectus, preliminary prospectus or registration statement” were a reference to “prospectus, preliminary prospectus, registration statement, offering memorandum or notice that is required to be filed before any distribution of securities may commence”;

(a.1) the expression “at-risk amount” of a taxpayer in respect of a partnership has the meaning that would be assigned by subsection 96(2.2) if paragraph 96(2.2)(c) read as follows:

(c) all amounts each of which is an amount owing at that time to the partnership, or to a person or partnership not dealing at arm’s length with the partnership, by the taxpayer or by a person or partnership not dealing at arm’s length with the taxpayer, other than any amount deducted under subparagraph 53(2)(c)(i.3) in computing the adjusted cost base, or under section 143.2 in computing the cost, to the taxpayer of the taxpayer’s partnership interest at that time, or any amount owing by the taxpayer to a person in respect of which the taxpayer is a subsidiary wholly-owned corporation or where the taxpayer is a trust, to a person that is the sole beneficiary of the taxpayer, and;

(2) Subsection (1) applies to fiscal periods that end after 2003.

206. (1) The portion of subsection 67.1(1.1) of the Act before paragraph (a) is replaced by the following:

Meal expenses for long-haul truck drivers

(1.1) An amount paid or payable in respect of the consumption of food or beverages by a long-haul truck driver during an eligible travel period of the driver is deemed to be the amount determined by multiplying the specified percentage in respect of the amount so paid or payable by the lesser of

(2) Subsection (1) applies to amounts that are paid, or become payable, after March 18, 2007.

207. (1) The portion of section 68 of the Act before paragraph (a) is replaced by the following:

Allocation of amounts in consideration for property, services or restrictive covenants

68. If an amount received or receivable from a person can reasonably be regarded as being in part the consideration for the disposition of a particular property of a taxpayer, for the provision of particular services by a taxpayer or for a restrictive covenant as defined by subsection 56.4(1) granted by a taxpayer,

(2) Section 68 of the Act is amended by striking out “and” at the end of paragraph (a), by adding “and” at the end of paragraph (b) and by adding the following after paragraph (b):

(c) the part of the amount that can reasonably be regarded as being consideration for the restrictive covenant is deemed to be an amount received or receivable by the taxpayer in respect of the restrictive covenant irrespective of the form or legal effect of the contract or agreement, and that part is deemed to be an amount paid or payable to the taxpayer by the person to whom the restrictive covenant was granted.

(3) Subsections (1) and (2) are deemed to have come into force on February 27, 2004, except that those subsections do not apply to a taxpayer’s grant of a restrictive covenant made in writing by the taxpayer before February 27, 2004 between the taxpayer and a person with whom the taxpayer deals at arm’s length.

208. (1) Paragraph 69(1)(b) of the English version of the Act is amended by striking out “and” at the end of subparagraph (iii).

(2) Subsection (1) applies to dispositions that occur after December 23, 1998.

209. (1) The portion of subsection 70(3) of the French version of the Act before paragraph (a) is replaced by the following:

Droits ou biens transférés aux bénéficiaires

(3) Si, avant l’expiration du délai accordé pour le choix prévu au paragraphe (2), un droit ou un bien auquel ce paragraphe s’appliquerait par ailleurs a été transféré ou distribué aux bénéficiaires ou à d’autres personnes ayant un droit de bénéficiaire sur la succession ou la fiducie, les règles ci-après s’appliquent :

(2) Subsection 70(5.2) of the Act is replaced by the following:

Resource property and land inventory

(5.2) If in a taxation year a taxpayer dies,

(a) the taxpayer is deemed

(i) to have disposed, at the time that is immediately before the taxpayer’s death, of each

(A) Canadian resource property of the taxpayer,

(B) foreign resource property of the taxpayer, and

(ii) subject to paragraph (c), to have received at that time proceeds of disposition for each such property equal to its fair market value at that time;

(b) any person who, as a consequence of the taxpayer’s death, acquires a property that is deemed by paragraph (a) to have been disposed of by the taxpayer is, subject to paragraph (c), deemed to have acquired the property at the time of the death at a cost equal to its fair market value at the time that is immediately before the death; and

(c) where the taxpayer was resident in Canada at the time that is immediately before the taxpayer’s death, a particular property described in clause (a)(i)(A), (B) or (C) is, on or after the death and as a consequence of the death, transferred or distributed to a spouse or common-law partner of the taxpayer described in paragraph (6)(a) or a trust described in paragraph (6)(b), and it can be shown within the period that ends 36 months after the death (or, where written application has been made to the Minister by the taxpayer’s legal representative within that period, within any longer period that the Minister considers reasonable in the circumstances) that the particular property has, within that period, vested indefeasibly in the spouse, common-law partner or trust, as the case may be,

(i) the taxpayer is deemed to have received, at the time that is immediately before the taxpayer’s death, proceeds of disposition of the particular property equal to

(A) if the particular property is Canadian resource property of the taxpayer or foreign resource property of the taxpayer, the amount specified by the taxpayer’s legal representative in the taxpayer’s return of income filed under paragraph 150(1)(b), not exceeding its fair market value at that time, and

(B) if the particular property was land included in the inventory of a business of the taxpayer, its cost amount to the taxpayer at that time, and

(ii) the spouse, common-law partner or trust, as the case may be, is deemed to have acquired at the time of the death the particular property at a cost equal to the amount determined under subparagraph (i) in respect of the disposition of it under paragraph (a).

(3) The portion of subsection 70(6) of the French version of the Act before paragraph (a) is replaced by the following:

Transfert ou distribution de biens à l’époux ou au conjoint de fait ou à une fiducie à leur profit

(6) Lorsqu’un bien d’un contribuable qui résidait au Canada immédiatement avant son décès est un bien auquel le paragraphe (5) s’appliquerait par ailleurs et qu’il est, par suite du décès du contribuable, transféré ou distribué :

(4) The portion of subsection 70(6.1) of the French version of the Act before paragraph (a) is replaced by the following:

Transfert ou distribution du compte de stabilisation du revenu net à l’époux ou au conjoint de fait ou à une fiducie

(6.1) Lorsqu’un bien qui est un compte de stabilisation du revenu net d’un contribuable est transféré ou distribué à l’une des personnes ci-après au moment du décès du contribuable ou postérieurement et par suite de ce décès, les paragraphes (5.4) et 73(5) ne s’appliquent pas au second fonds du compte de stabilisation du revenu net du contribuable :

(5) The portion of paragraph 70(7)(b) of the French version of the Act before subparagraph (i) is replaced by the following:

b) le représentant légal du contribuable peut, dans la déclaration de revenu du contribuable (sauf celle produite en vertu des paragraphes (2) ou 104(23), de l’alinéa 128(2)e) ou du paragraphe 150(4)) dans laquelle il énumère un ou plusieurs biens, sauf un compte de stabilisation du revenu net, qui ont été transférés ou distribués à la fiducie au moment du décès du contribuable ou postérieurement et par suite de ce décès et dont la juste valeur marchande globale immédiatement après ce décès est au moins égale au total des dettes non admissibles du contribuable, faire un choix pour que, à la fois :

(6) Subsection (2) applies to taxation years that begin after 2006.

210. The portion of subsection 72(2) of the French version of the Act before paragraph (a) is replaced by the following:

Choix par les représentants légaux et le bénéficiaire du transfert concernant les provisions

(2) Lorsqu’un bien d’un contribuable qui représente le droit de recevoir une somme a été, au moment du décès du contribuable ou postérieurement et par suite de ce décès, transféré ou distribué à son époux ou conjoint de fait visé à l’alinéa 70(6)a) ou à une fiducie visée à l’alinéa 70(6)b) (appelés « bénéficiaire du transfert » au présent paragraphe), que le contribuable résidait au Canada immédiatement avant son décès et que le représentant légal du contribuable et le bénéficiaire du transfert ont fait, à l’égard du bien, un choix conjoint selon le formulaire prescrit, les règles ci-après s’appliquent :

211. (1) Subsection 73(2) of the Act is replaced by the following:

Capital cost and amount deemed allowed to spouse, etc., or trust

(2) If a transferee is deemed by subsection (1) to have acquired any particular depreciable property of a prescribed class of a taxpayer for an amount determined under paragraph (1)(b) and the capital cost to the taxpayer of the particular property exceeds the amount determined under that paragraph, in applying sections 13 and 20 and any regulations made under paragraph 20(1)(a)

(a) the capital cost to the transferee of the particular property is deemed to be the amount that was the capital cost to the taxpayer of the particular property; and

(b) the excess is deemed to have been allowed to the transferee in respect of the particular property under regulations made under paragraph 20(1)(a) in computing income for taxation years before the acquisition of the particular property.

(2) Paragraph 73(3)(a) of the Act is replaced by the following:

(a) the property was, before the transfer, land in Canada or depreciable property in Canada of a prescribed class, of the taxpayer, or any eligible capital property in respect of a fishing or farming business carried on in Canada by the taxpayer;

(3) Subsection (1) applies to transfers that occur after 1999.

(4) Subsection (2) applies to dispositions of property that occur after May 1, 2006, other than a disposition in respect of which a taxpayer has made an election under subsection 11(5) of the Budget Implementation Act, 2006, No. 2.

212. (1) Paragraph 75(3)(b) of the Act is replaced by the following:

(b) by an employee life and health trust, an employee trust, a private foundation that is a registered charity, a related segregated fund trust (within the meaning assigned by paragraph 138.1(1)(a)), a trust described by paragraph (a.1) of the definition “trust” in subsection 108(1), or a trust described by paragraph 149(1)(y);

(2) Subsection (1) applies to taxation years that begin after October 31, 2011.

213. (1) The Act is amended by adding the following after section 75.1:

Rules applicable with respect to “qualifying trust annuity”

75.2 If an amount paid to acquire a qualifying trust annuity with respect to a taxpayer was deductible under paragraph 60(l) in computing the taxpayer’s income,

(a) any amount that is paid out of or under the annuity at any particular time after 2005 and before the death of the taxpayer is deemed to have been received out of or under the annuity at the particular time by the taxpayer, and not to have been received by any other taxpayer; and

(b) if the taxpayer dies after 2005

(i) an amount equal to the fair market value of the annuity at the time of the taxpayer’s death is deemed to have been received, immediately before the taxpayer’s death, by the taxpayer out of or under the annuity, and

(ii) for the purpose of subsection 70(5), the annuity is to be disregarded in determining the fair market value (immediately before the taxpayer’s death) of the taxpayer’s interest in the trust that is the annuitant under the annuity.

(2) Subsection (1) is deemed to have come into force on January 1, 2006.

214. (1) Subparagraph 80.04(6)(a)(ii) of the Act is replaced by the following:

(ii) on or before the later of

(A) the expiry of the 90-day period commencing on the day of mailing of an assessment of tax payable under this Part or a notification that no tax is payable under this Part, as the case may be, for a taxation year or fiscal period described in clause (i)(A) or (B), as the case may be, and

(B) if the debtor is an individual (other than a trust) or a testamentary trust, the day that is one year after the taxpayer’s filing-due date for the year;

(2) Subsection (1) applies for taxation years that end after February 21, 1994.

215. (1) The Act is amended by adding the following after section 80.1:

Application

80.2 (1) Subsections (2) to (13) apply if

(a) in a taxation year, a taxpayer, under the terms of a contract, pays to a person (referred to in this section as the “recipient”) an amount (referred to in this section as the “specified amount”) that may reasonably be considered to be received by the recipient as a reimbursement of, or a contribution or an allowance in respect of, an amount (referred to in this section as the “original amount”)

(i) that was described by paragraph 18(1)(m) and was paid or payable by the recipient, or

(ii) that was, in respect of the recipient, an amount described by paragraph 12(1)(o);

(b) the original amount is paid or became payable or receivable in a taxation year or fiscal period of the recipient that begins before 2007; and

Rules relating to time of payment

(2) If the specified amount is paid in a taxation year of the taxpayer that begins before 2008, the eligible portion of the specified amount, referred to in subsection (11), is deemed to be a payment described by paragraph 18(1)(m). If, however, the specified amount is paid in a taxation year of the taxpayer that begins after 2007, the specified amount is deemed, for the purpose of applying this section to the taxpayer, to be nil.

Applying paragraph 18(1)(m)

(3) For the purpose of applying paragraph 18(1)(m) for the taxpayer’s taxation year in which the specified amount was paid, the amount to which that paragraph applies is to be determined for that taxation year

(a) if the taxpayer was in existence at the time the original amount became receivable by a person referred to in subparagraph 12(1)(o)(i) or became payable to a person referred to in subparagraph 18(1)(m)(i), as if the specified amount were paid by the taxpayer at that time; and

(b) in any other case, as if

(i) the taxpayer were in existence and had a calendar taxation year at the time the original amount became receivable by a person referred to in subparagraph 12(1)(o)(i) or became payable to a person referred to in subparagraph 18(1)(m)(i), and

(ii) the specified amount were paid by the taxpayer at that time.

Exception for certain partnership reimbursements

(4) Subsection (3) does not apply to a specified amount paid by a taxpayer if

(a) the recipient is a partnership;

(b) the original amount became receivable by a person referred to in subparagraph 12(1)(o)(i) or became payable to a person referred to in subparagraph 18(1)(m)(i), in a particular fiscal period of the partnership;

(d) the taxpayer paid the specified amount before the end of the taxation year of the taxpayer in which that particular fiscal period ends.

Specified amount deemed to be paid at end of taxation year

(5) A specified amount paid by the taxpayer to a partnership is deemed to have been paid on the last day of a particular taxation year of the taxpayer, and not at the time it was paid, if

(a) the taxpayer paid an amount to the partnership in the particular taxation year (referred to in this subsection as the “initial payment”);

(b) the initial payment was paid before September 17, 2004;

(d) the taxpayer’s share of the original amount in respect of the initial payment is greater than the initial payment;

(e) the specified amount is equal to or less than the difference between the taxpayer’s share of the original amount in respect of the initial payment and the initial payment;

(f) the taxpayer elects in the taxpayer’s return of income for the taxpayer’s taxation year that includes the time at which the specified amount would, if this Act were read without reference to this subsection, have been paid, to have this subsection apply to the specified amount; and

(g) the specified amount is paid before 2006.

Inclusion in recipient’s income

(6) The recipient shall include in computing the recipient’s income for the taxation year or fiscal period in which the original amount was paid or became payable or receivable, the amount, if any, by which the eligible portion of the specified amount exceeds the portion of the original amount that was included in computing the income of the recipient for the taxation year or fiscal period because of paragraph 12(1)(o) or that was not deductible in computing the income of the recipient for the taxation year or fiscal period because of paragraph 18(1)(m).

Interpretation — portion of the original amount

(7) For the purpose of subsection (6), the portion of the original amount that was included in computing the income of the recipient or that was not deductible in computing the income of the recipient is the amount that would be included in computing the income of the recipient under paragraph 12(1)(o) or that would not be deductible in computing the income of the recipient under paragraph 18(1)(m), if the original amount were equal to the eligible portion of the specified amount.

Inclusion in recipient’s income

(8) The recipient shall include, in computing the recipient’s income for its taxation year or fiscal period in which the original amount was paid or became payable or receivable, the amount, if any, by which the specified amount exceeds the eligible portion of the specified amount.

Deduction by taxpayer

(9) Subject to paragraphs 18(1)(a) and (b), the taxpayer may deduct in computing the taxpayer’s income for the taxpayer’s taxation year in which the specified amount was paid, the amount, if any, by which the specified amount exceeds the eligible portion of the specified amount.

Specified amount deemed not to be payable or receivable

(10) Except for the purposes of this section and subparagraph 53(1)(e)(iv.1),

(a) the taxpayer is deemed not to have paid, and not to have been obligated to pay, the specified amount; and

(b) the recipient is deemed not to have received, and not to have been entitled to receive, the specified amount.

Eligible portion of a specified amount

(11) The eligible portion of a specified amount is

(a) an amount equal to the specified amount if

(i) the specified amount was paid before September 17, 2004,

(ii) the original amount is a tax imposed under a provincial law on the production of

(A) petroleum, natural gas or related hydrocarbons from a natural accumulation of petroleum or natural gas (other than a mineral resource) located in Canada, or from an oil or gas well located in Canada if the petroleum, natural gas or related hydrocarbons are not, before extraction, owned by the Crown in right of Canada or a province, or

(B) metals, minerals or coal from a mineral resource located in Canada if the metals, minerals or coal are not, before extraction, owned by the Crown in right of Canada or a province,

(iii) the specified amount does not exceed the taxpayer’s share of the original amount, or

(iv) the original amount is a prescribed amount; and

(b) the taxpayer’s share of the original amount, in any other case.

Taxpayer’s share of original amount

(12) A taxpayer’s share of an original amount in respect of a specified amount paid by the taxpayer to a recipient in respect of a property is the amount that may reasonably be considered to be the taxpayer’s share of the total of all amounts described in paragraph 12(1)(o) or 18(1)(m) in respect of the property, which share may not exceed the total of

(a) that proportion of the total of all amounts described in paragraph 12(1)(o) or 18(1)(m) in respect of the property that the taxpayer’s share of production from the property payable to the taxpayer as a royalty, which royalty is computed without reference to the costs of exploration or production, is of the total production from the property, and

(b) that proportion of the total of all amounts described in paragraph 12(1)(o) or 18(1)(m) in respect of the property (other than those amounts which the recipient has received or is entitled to receive as a reimbursement, contribution or allowance in respect of a royalty described in paragraph (a)) that the taxpayer’s share of the income from the property is of the total income from the property.

Reduction in original amount for Part XII of the regulations

(13) For the purpose of applying Part XII of the Income Tax Regulations, an original amount in respect of which a specified amount is received is deemed, for the taxation year in which the original amount was paid or became payable or receivable, not to include an amount equal to the eligible portion of the specified amount.

(2) Subsection (1) applies in respect of specified amounts paid after 2001.

(3) Where a person is liable to an amount of tax under Part I of the Act for a taxation year that exceeds the amount to which the person would be liable if section 80.2 of the Act applied as it read on December 31, 2001, the person is deemed, for the purpose of determining any interest or penalty payable by that person, to have paid the excess on that person’s balance-due day, if

(a) the person’s balance-due day for the taxation year was before September 17, 2004; and

(b) the excess was paid to the Receiver General before March 2005.

(4) Notwithstanding subsections 152(4) to (5) of the Act, all assessments, determinations, and redeterminations may be made as necessary to give effect to subsections (1) to (3).

216. (1) The portion of subsection 80.4(8) of the Act before paragraph (a) is replaced by the following:

Meaning of connected

(8) For the purposes of subsection (2), a person or partnership is connected with a shareholder of a corporation if that person or partnership does not deal at arm’s length with, or is affiliated with, the shareholder, unless, in the case of a person, that person is

(2) Subsection (1) applies in respect of loans made and indebtedness arising after October 31, 2011.

217. (1) Paragraph 81(1)(g.3) of the Act is replaced by the following:

Certain government funded trusts

(g.3) the amount that, but for this paragraph, would be the income of the taxpayer for the year if

(i) the taxpayer is the trust established under

(A) the 1986-1990 Hepatitis C Settlement Agreement entered into by Her Majesty in right of Canada and Her Majesty in right of each of the provinces,

(B) the Pre-1986/Post-1990 Hepatitis C Settlement Agreement entered into by Her Majesty in right of Canada, or

(C) the Indian Residential Schools Settlement Agreement entered into by Her Majesty in right of Canada on May 8, 2006, and

(ii) the only contributions made to the taxpayer before the end of the year are those provided for under the relevant Agreement described in subparagraph (i);

(2) Subsection 81(1) of the Act is amended by striking out “or” at the end of paragraph (q), by adding “or” at the end of paragraph (r) and by adding the following after paragraph (r):

Salary deferral leave plans

(s) an amount paid to the taxpayer in the year under an arrangement described in paragraph 6801(a) of the Income Tax Regulations to the extent that the amount may reasonably be considered to be attributable to amounts that

(i) were included in the taxpayer’s income for a preceding taxation year and were income, interest or other additional amounts, described in subparagraph 6801(a)(iv) of the Income Tax Regulations, and

(ii) were re-contributed by the taxpayer under the arrangement in a preceding taxation year.

(3) Subsection (1) applies to the 2006 and subsequent taxation years, except that for the 2006 taxation year, subparagraph 81(1)(g.3)(i) of the Act, as enacted by subsection (1), is to be read as follows:

(i) the taxpayer is the trust established under

(A) the 1986-1990 Hepatitis C Settlement Agreement entered into by Her Majesty in right of Canada and Her Majesty in right of each of the provinces, or

(B) the Pre-1986/Post-1990 Hepatitis C Settlement Agreement entered into by Her Majesty in right of Canada, and

(4) Subsection (2) applies to the 2000 and subsequent taxation years.

218. (1) Clause 82(1)(a)(ii)(B) of the Act, as it read immediately before its repeal by S.C. 2007, c. 2, s. 44(1), is replaced by the following:

(B) where the taxpayer is an individual, the total of all amounts each of which is, or is deemed by paragraph 260(12)(b) to have been, an amount paid by the taxpayer in the year and deemed by subsection 260(5.1) to have been received by another person as a taxable dividend,

(2) The portion of subsection 82(1) of the Act before paragraph (c) is replaced by the following:

Taxable dividends received

82. (1) In computing the income of a taxpayer for a taxation year, there shall be included the total of the following amounts:

(a) the amount, if any, by which

(i) the total of all amounts, other than eligible dividends and amounts described in paragraph (c), (d) or (e), received by the taxpayer in the taxation year from corporations resident in Canada as, on account of, in lieu of payment of or in satisfaction of, taxable dividends,

exceeds

(ii) if the taxpayer is an individual, the total of all amounts each of which is, or is deemed by paragraph 260(12)(b) to have been, paid by the taxpayer in the taxation year and deemed by subsection 260(5.1) to have been received by another person as a taxable dividend (other than an eligible dividend);

(a.1) the amount, if any, by which

(i) the total of all amounts, other than amounts included in computing the income of the taxpayer because of paragraph (c), (d) or (e), received by the taxpayer in the taxation year from corporations resident in Canada as, on account of, in lieu of payment of or in satisfaction of, eligible dividends,

exceeds

(b) if the taxpayer is an individual, other than a trust that is a registered charity, the total of

(i) 25% of the amount determined under paragraph (a) in respect of the taxpayer for the taxation year, and

(ii) the product of the amount determined under paragraph (a.1) in respect of the taxpayer for the taxation year multiplied by

(A) for taxation years that end after 2005 and before 2010, 45%,

(B) for the 2010 taxation year, 44%,

(D) for taxation years that end after 2011, 38%;

(3) Subsection 82(1.1) of the Act is replaced by the following:

Limitation as to paragraph (1)(c)

(1.1) An amount shall be included in the amounts described in paragraph (1)(c) in respect of a taxable dividend received at any time as part of a dividend rental arrangement only if that dividend was received on a share acquired before that time and after April, 1989.

(4) Subsection (1) applies

(a) to amounts paid in respect of arrangements made after 2001, except that, in its application to amounts paid in respect of an arrangement made before December 21, 2002, clause 82(1)(a)(ii)(B) of the Act, as enacted by subsection (1), is to be read without reference to the expression “or is deemed by paragraph 260(12)(b) to have been” unless an election referred to in paragraph 358(34)(b) has been made in respect of the arrangement; and

(b) to amounts paid in respect of arrangements made after November 2, 1998 and before 2002, if the parties to the arrangement have made the election referred to in paragraph 358(34)(b), except that in its application to those arrangements, the reference to “subsection 260(5.1)” in clause 82(1)(a)(ii)(B) of the Act, as enacted by subsection (1), is to be read as a reference to “subsection 260(5)”.

(5) Subsections (2) and (3) apply to amounts received or paid after 2005.

219. (1) Subsection 84(4.1) of the Act is replaced by the following:

Deemed dividend on reduction of paid-up capital

(a) the amount may reasonably be considered to be derived from proceeds of disposition realized by the public corporation, or by a person or partnership in which the public corporation had a direct or indirect interest at the time that the proceeds were realized, from a transaction that occurred

(i) outside the ordinary course of the business of the corporation, or of the person or partnership that realized the proceeds, and

(ii) within the period that commenced 24 months before the payment; and

(b) no amount that may reasonably be considered to be derived from those proceeds was paid by the public corporation on a previous reduction of the paid-up capital in respect of any class of shares of its capital stock.

(2) Subsection 84(7) of the Act is replaced by the following:

When dividend payable

(7) A dividend that is deemed by this section or section 84.1, 128.1 or 212.1 to have been paid at a particular time is deemed, for the purposes of this subdivision and sections 131 and 133, to have become payable at that time.

(3) Subsection (1) applies to amounts paid after 1996, except that in respect of those amounts paid before February 27, 2004, subsection 84(4.1) of the Act, as enacted by subsection (1), is to be read as follows:

(4.1) Any amount paid by a public corporation on the reduction of the paid-up capital in respect of any class of shares of its capital stock, otherwise than by way of a redemption, acquisition or cancellation of any shares of that class or by way of a transaction described in subsection (2) or in section 86, is deemed to have been paid by the corporation and received by the person to whom it was paid, as a dividend, unless the amount may reasonably be considered to be derived from proceeds of disposition realized by the public corporation, or by a person or partnership in which the public corporation had a direct or indirect interest at the time that the proceeds were realized, from a transaction that occurred outside the ordinary course of the business of the public corporation, or of the person or partnership that realized the proceeds.

(4) Subsection (2) applies to dividends deemed to have been paid after February 23, 1998.

220. (1) Paragraph 85(1)(d.1) of the Act is replaced by the following:

(d.1) for the purpose of determining after the disposition time the amount to be included under paragraph 14(1)(b) in computing the corporation’s income, there shall be added to the amount otherwise determined for C in that paragraph the amount determined by the formula

1/2 × [(A × B/C) – 2(D – E)] + F + G

where

A is the amount, if any, determined for Q in the definition “cumulative eligible capital” in subsection 14(5) in respect of the taxpayer’s business immediately before the disposition time,

B is the fair market value immediately before the disposition time of the eligible capital property disposed of to the corporation by the taxpayer,

C is the total of the fair market value immediately before the disposition time of all eligible capital property of the taxpayer in respect of the business and each amount that was described in B in respect of an earlier disposition made after the taxpayer’s adjustment time,

D is the amount, if any, that would be included under subsection 14(1) in computing the taxpayer’s income as a result of the disposition if the values determined for C and D in paragraph 14(1)(b) were zero,

E is the amount, if any, that would be included under subsection 14(1) in computing the taxpayer’s income as a result of the disposition if the value determined for D in paragraph 14(1)(b) were zero,

F is the total of all amounts, each of which is an amount determined under this paragraph as it applied to the taxpayer in respect of a disposition to the corporation on or before the disposition time, and

G is the total of all amounts, each of which is an amount determined under subparagraph 88(1)(c.1)(ii) as it applied to the taxpayer in respect of a winding-up before the disposition time;

(2) Subsection 85(1) of the Act is amended by adding the following after paragraph (d.1):

(d.11) for the purpose of determining after the time of the disposition (referred to in this paragraph and in paragraphs (d.1) and (d.12) as the “disposition time”) the amount to be included under paragraph 14(1)(a) or (b) in computing the corporation’s income, there shall be added to the amount otherwise determined for each of A and F in the definition “cumulative eligible capital” in subsection 14(5) the amount, if any, determined by the formula

(A × B/C) + D + E

where

A is the amount, if any, that would be determined for F in that definition in respect of the taxpayer’s business at the beginning of the taxpayer’s following taxation year if the taxpayer’s taxation year that includes the disposition time had ended immediately after the disposition time and if, in respect of the disposition, this Act were read without reference to paragraph (d.12),

B is the fair market value immediately before the disposition time of the eligible capital property disposed of to the corporation by the taxpayer,

C is the fair market value immediately before the disposition time of all eligible capital property of the taxpayer in respect of the business and each amount that was described in B in respect of an earlier disposition made after the taxpayer’s adjustment time,

D is the total of all amounts, each of which is an amount determined under this paragraph as it applied to the taxpayer in respect of a disposition to the corporation on or before the disposition time, and

E is the total of all amounts, each of which is an amount determined under subparagraph 88(1)(c.1)(i) as it applied to the taxpayer in respect of a winding-up before the disposition time;

(d.12) for the purpose of determining after the disposition time the amount to be included under paragraph 14(1)(a) or (b) in computing the taxpayer’s income, the amount, if any, determined by the formula in paragraph (d.11) in respect of the disposition is to be deducted from each of the amounts otherwise determined

(i) by subparagraph 14(1)(a)(ii), and

(ii) for the description of B in paragraph 14(1)(b);

(3) Subsection (1) applies to taxation years of a corporation that end after December 20, 2002.

(4) Subsection (2) applies in respect of the disposition of an eligible capital property by a taxpayer to a corporation unless

(a) the disposition by the taxpayer occurred before December 21, 2002; and

(b) the corporation disposed of the eligible capital property, before June 7, 2007 and in a taxation year of the corporation ending after February 27, 2000, to a person with whom the corporation was dealing at arm’s length at the time of that disposition by the corporation.

221. (1) Section 85.1 of the Act is amended by adding the following after subsection (2.1):

Issuance deemed made to vendor

(2.2) For the purposes of subsection (1), if a purchaser issues shares of a class of its capital stock (in this subsection referred to as “pur-chaser shares”) to a trust under a court-approved plan or scheme of arrangement in consideration for which a vendor disposes of exchanged shares that trade on a designated stock exchange to the purchaser solely for purchaser shares that are widely traded on a designated stock exchange immediately after and as part of completion of the plan or scheme of arrangement, the issuance to the trust is deemed to be an issuance to the vendor.

(2) Section 85.1 of the Act is amended by adding the following after subsection (6):

Issuance deemed made to vendor

(6.1) For the purposes of subsection (5), if a foreign purchaser issues shares of a class of its capital stock (in this subsection referred to as “foreign purchaser shares”) to a trust under a court-approved plan or scheme of arrangement in consideration for which a vendor disposes of exchanged foreign shares that trade on a designated stock exchange to the purchaser solely for foreign purchaser shares that are widely traded on a designated stock exchange immediately after and as part of completion of the plan or scheme of arrangement, the issuance to the trust is deemed to be an issuance to the vendor.

(3) The portion of subsection 85.1(7) of the English version of the Act before paragraph (a) is replaced by the following:

Application of subsection (8)

(7) Subsection (8) applies in respect of the disposition before 2013 by a taxpayer of SIFT wind-up entity equity (referred to in subsection (8) as the “particular unit”) to a taxable Canadian corporation if

(4) The portion of paragraph 85.1(8)(f) of the English version of the Act before the first formula is replaced by the following:

(f) in computing the paid-up capital in respect of each class of shares of the capital stock of the corporation at any time after the disposition there shall be deducted the amount determined by the formula

(5) Subsections (1) and (2) apply to share exchanges made after June 2005 except that those subsections do not apply to a particular share exchange of a taxpayer that occurs before November 5, 2010 if, within six months of being advised by the Minister of National Revenue that subsection (1) or (2), as the case may be, applies to the exchange, the taxpayer elects in writing not to have that subsection apply to the exchange.

222. (1) Subparagraphs 86.1(2)(c)(ii) and (iii) of the Act are replaced by the following:

(ii) at the time of the distribution, the shares of the class that includes the original shares are widely held and

(A) are actively traded on a designated stock exchange in the United States, or

(B) are required, under the Securities Exchange Act of 1934 of the United States, as amended from time to time, to be registered with the Securities and Exchange Commission of the United States and are so registered, and

(iii) under the provisions of the Internal Revenue Code of 1986 of the United States, as amended from time to time, that apply to the distribution, the shareholders of the particular corporation who are resident in the United States are not taxable in respect of the distribution;

(2) Subparagraph 86.1(2)(e)(i) of the Act is replaced by the following:

(i) that, at the time of the distribution, the shares of the class that includes the original shares are shares described in subparagraph (c)(ii) or (d)(ii),

(3) Subparagraph 86.1(2)(e)(vi) of the Act is replaced by the following:

(vi) in the case of a distribution that is not prescribed, that the distribution is not taxable under the provisions of the Internal Revenue Code of 1986 of the United States, as amended from time to time, that apply to the distribution,

(4) Subsections (1) to (3) apply to distributions made after 1999, except that

(a) with respect to a distribution in respect of original shares described in clause 86.1(2)(c)(ii)(B) of the Act, as enacted by subsection (1),

(i) information referred to in paragraph 86.1(2)(e) of the Act is deemed to be provided to the Minister of National Revenue on a timely basis if it is provided to that Minister before the 90th day after the day on which this Act receives royal assent; and

(ii) an election referred to in paragraph 86.1(2)(f) of the Act is deemed to be filed on a timely basis if it is filed with the Minister of National Revenue before the 90th day after the day on which this Act receives royal assent; and

(b) for the period before December 14, 2007, the reference to “designated stock exchange” in clause 86.1(2)(c)(ii)(A), as enacted by subsection (1), is to be read as a reference to “prescribed stock exchange”.

223. (1) Paragraph 87(2)(g.2) of the Act is replaced by the following:

Financial institution rules

(g.2) for the purposes of paragraphs 142.4(4)(c) and (d) and subsections 142.51(11) and 142.6(1), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;

(2) Subsection 87(2) of the Act is amended by adding the following after paragraph (g.4):

Patronage dividends

(g.5) for the purposes of section 135, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;

(3) Paragraphs 87(2)(j.9) and (j.91) of the Act are replaced by the following:

Part I.3 tax

(j.9) for the purpose of determining the amount deductible by the new corporation for any taxation year under section 125.3, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;

Part I.3 and Part VI tax

(j.91) for the purpose of determining the amount deductible under subsection 181.1(4) or 190.1(3) by the new corporation for any taxation year, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation, except that this paragraph does not affect the determination of the fiscal period of any corporation or the tax payable by any corporation for any taxation year that ends before the amalgamation;

(4) Subsection 87(2) of the Act is amended by adding the following after paragraph (l.3):

Subsection 13(4.2) election

(l.4) for the purposes of subsection 13(4.3) and paragraph 20(16.1)(b), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;

Contingent amount — section 143.4

(l.5) for the purposes of section 143.4, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;

(5) Subsection 87(2) of the Act is amended by adding the following after paragraph (m.1):

Gift of predecessor’s property

(m.2) for the purpose of computing the fair market value of property under subsection 248(35), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;

(6) Paragraph 87(2)(o) of the Act is replaced by the following:

Expiration of options previously granted

(o) for the purpose of subsection 49(2),

(i) any option granted by a predecessor corporation that expires after the amalgamation is deemed to have been granted by the new corporation, and any proceeds received by the predecessor corporation for the granting of the option is deemed to have been received by the new corporation,

(ii) any person to whom the option was granted who was not dealing at arm’s length with the predecessor corporation at the time that the option was granted is deemed to have been dealing with the new corporation not at arm’s length at the time that the option was granted, and

(iii) any person to whom the option was granted who was dealing at arm’s length with the predecessor corporation at the time that the option was granted is deemed to have been dealing with the new corporation at arm’s length at the time that the option was granted;

(7) Subsection 87(2) of the Act is amended by adding the following after paragraph (q):

Employees profit sharing plan

(r) an election made under subsection 144(10) by a predecessor corporation is deemed to be an election made by the new corporation;

(8) Subparagraph 87(2)(s)(ii) of the Act is replaced by the following:

(ii) if, on the amalgamation, the new corporation issues a share (in this subparagraph and subsection 135.1(10) referred to as the “new share”) that is described in all of paragraphs (b) to (d) of the definition “tax deferred cooperative share” in subsection 135.1(1) to a taxpayer in exchange for a share of a predecessor corporation (in this subparagraph and subsection 135.1(10) referred to as the “old share”) that was, at the end of the predecessor corporation’s last taxation year, a tax deferred cooperative share within the meaning assigned by that definition, and the amount of paid-up capital, and the amount, if any, that the taxpayer is entitled to receive on a redemption, acquisition or cancellation, of the new share are equal to those amounts, respectively, in respect of the old share, subsection 135.1(10) applies in respect of the exchange;

(9) Paragraph 87(2)(mm) of the Act is repealed.

(10) Section 87 of the Act is amended by adding the following after subsection (2.2):

Quebec credit unions

(2.3) For the purpose of applying this section to an amalgamation governed by section 689 of An Act respecting financial services cooperatives, R.S.Q., c. C-67.3, an investment deposit of a credit union is deemed to be a share of a separate class of the capital stock of a predecessor corporation in respect of the amalgamation the adjusted cost base and paid up capital of which to the credit union is equal to the adjusted cost base to the credit union of the investment deposit immediately before the amalgamation if

(a) immediately before the amalgamation, the investment deposit is an investment deposit to which section 425 of the Savings and Credit Unions Act, R.S.Q., c. C-4.1, applies to the investment fund of that predecessor corporation; and

(b) on the amalgamation the credit union disposes of the investment deposit for consideration that consists solely of shares of a class of the capital stock of the new corporation.

(11) Paragraphs 87(4.4)(c) and (d) of the Act are replaced by the following:

(i) a share (in this subsection referred to as the “old share”) of the predecessor corporation that was a flow-through share (other than a right to acquire a share) was issued to the person before the amalgamation, or

(ii) a right was issued to the person before the amalgamation to acquire a share that would, if it were issued, be a flow-through share, and

(d) the new corporation

(i) issues, on the amalgamation and in consideration for the disposition of the old share, a share (in this subsection referred to as a “new share”) of any class of its capital stock to the person (or to any person or partnership that subsequently acquired the old share) and the terms and conditions of the new share are the same as, or substantially the same as, the terms and conditions of the old share, or

(ii) is, because of the right referred to in subparagraph (c)(ii), obliged after the amalgamation to issue to the person a share of any class of the new corporation’s capital stock that would, if it were issued, be a flow-through share,

(12) Subsection 87(9) of the Act is amended by adding the following after paragraph (a.2):

(a.21) for the purpose of paragraph (4.4)(d)

(i) each parent share received by a shareholder of a predecessor corporation is deemed to be a share of the capital stock of the new corporation issued to the shareholder by the new corporation on the merger, and

(ii) any obligation of the parent to issue a share of any class of its capital stock to a person in circumstances described in subparagraph (4.4)(d)(ii) is deemed to be an obligation of the new corporation to issue a share to the person;

(13) Subsection (1) and paragraph 87(2)(j.9) of the Act, as enacted by subsection (3), apply to taxation years that begin after October 31, 2011.

(14) Subsection (2) applies to amalgamations that occur, and windings-up that begin, after 1997.

(15) Paragraph 87(2)(j.91) of the Act, as enacted by subsection (3), and paragraph 87(2)(l.4) of the Act, as enacted by subsection (4), apply to amalgamations that occur, and windings-up that begin, after December 20, 2002.

(16) Paragraph 87(2)(l.5) of the Act, as enacted by subsection (4), applies in respect of taxation years that end on or after March 16, 2011.

(17) Subsection (5) applies in respect of gifts of property made after 6:00 p.m. (Eastern Standard Time) on December 4, 2003.

(18) Subsection (6) applies to options issued after October 24, 2012.

(19) Subsection (7) applies to amalgamations that occur, and windings-up that begin, after 1994.

(20) Subsection (8) is deemed to have come into force on September 29, 2009.

(21) Subsection (9) applies to amalgamations that occur after March 20, 2003.

(22) Subsection (10) applies to amalgamations that occur after June 2001.

(23) Subsections (11) and (12) apply to amalgamations that occur after 1997.

224. (1) Paragraph 88(1)(c.1) of the Act is replaced by the following:

(c.1) for the purpose of determining after the winding-up the amount to be included under subsection 14(1) in computing the parent’s income in respect of the business carried on by the subsidiary immediately before the winding-up

(i) there shall be added to the amount otherwise determined for each of the descriptions of A and F in the definition “cumulative eligible capital” in subsection 14(5), the total of all amounts, each of which is the amount, if any,

(A) determined for the description of F in that definition in respect of that business immediately before the winding up,

(B) determined under this subparagraph as it applied to the subsidiary in respect of a winding-up before that time, or

(C) determined under paragraph 85(1)(d.11) as it applied to the subsidiary in respect of a disposition to the subsidiary before that time, and

(ii) there shall be added to the amount determined for the description of C in the formula in paragraph 14(1)(b), the total of all amounts, each of which is an amount that is

(A) one-half of the amount, if any, determined for the description of Q in that definition in respect of that business immediately before the winding up,

(B) determined under this subparagraph as it applied to the subsidiary in respect of a winding-up before that time, or

(C) determined under paragraph 85(1)(d.1) as it applied to the subsidiary in respect of a disposition to the subsidiary before that time;

(2) Paragraph 88(1)(c.3) of the Act is amended by striking out “or” at the end of subparagraph (iv) and by adding the following after subparagraph (v):

(vi) a share of the capital stock of the subsidiary or a debt owing by it, if the share or debt, as the case may be, was owned by the parent immediately before the winding-up, or

(vii) a share of the capital stock of a corporation or a debt owing by a corporation, if the fair market value of the share or debt, as the case may be, was not, at any time after the beginning of the winding-up, wholly or partly attributable to property distributed to the parent on the winding-up;

(3) Subparagraph 88(1)(c.4)(i) of the Act is replaced by the following:

(i) a share of the capital stock of the parent that was

(A) received as consideration for the acquisition of a share of the capital stock of the subsidiary by the parent or by a corporation that was a specified subsidiary corporation of the parent immediately before the acquisition, or

(B) issued for consideration that consists solely of money,

(4) Paragraph 88(1)(e.6) of the Act is replaced by the following:

(e.6) if a subsidiary has made a gift in a taxation year (in this section referred to as the “gift year”), for the purposes of computing the amount deductible under section 110.1 by the parent for its taxation years that end after the subsidiary was wound up, the parent is deemed to have made a gift, in each of its taxation years in which a gift year of the subsidiary ended, equal to the amount, if any, by which the total of all amounts, each of which is the amount of a gift or, in the case of a gift made after December 20, 2002, the eligible amount of the gift, made by the subsidiary in the gift year exceeds the total of all amounts deducted under section 110.1 by the subsidiary in respect of those gifts;

(5) The portion of paragraph 88(1.1)(e) of the Act before subparagraph (i) is replaced by the following:

(e) if control of the parent has been acquired by a person or group of persons at any time after the commencement of the winding-up, or control of the subsidiary has been acquired by a person or group of persons at any time whatever, no amount in respect of the subsidiary’s non-capital loss or farm loss for a taxation year ending before that time is deductible in computing the taxable income of the parent for a particular taxation year ending after that time, except that such portion of the subsidiary’s non-capital loss or farm loss as may reasonably be regarded as its loss from carrying on a business and, where a business was carried on by the subsidiary in that year, such portion of the non-capital loss as may reasonably be regarded as being in respect of an amount deductible under paragraph 110(1)(k) in computing its taxable income for the year is deductible only

(6) Subsection (1) applies in respect of the disposition of an eligible capital property by a subsidiary to a parent unless

(a) the disposition by the subsidiary occurred before December 21, 2002; and

(b) the parent disposed of the eligible capital property, before November 9, 2006, and in a taxation year of the parent ending after February 27, 2000, to a person with whom the parent did not deal at arm’s length at the time of that disposition by the parent.

(7) Subsections (2) and (3) apply to windings-up that begin, and amalgamations that occur, after 1997.

(8) Subsection (4) applies to windings-up that begin, and amalgamations that occur, after December 20, 2002.

(9) Subsection (5) applies to windings-up that begin after May 1996.

225. (1) Clause (a)(i)(A) of the definition “capital dividend account” in subsection 89(1) of the Act is replaced by the following:

(A) the amount of the corporation’s capital gain — computed without ref- erence to subparagraphs 52(3)(a)(ii) and 53(1)(b)(ii) — from the disposition (other than a disposition that is the making of a gift after December 8, 1997 that is not a gift described in subsection 110.1(1)) of a property in the period beginning at the beginning of its first taxation year that began after the corporation last became a private corporation and that ended after 1971 and ending immediately before the particular time (in this definition referred to as “the period”)

(2) Clause (a)(i)(A) of the definition “capital dividend account” in subsection 89(1) of the Act, as enacted by subsection (1), is replaced by the following:

(A) the amount of the corpora-tion’s capital gain — computed without reference to subparagraphs 52(3)(a)(ii) and 53(1)(b)(ii) — from the disposition (other than a disposition under subsection 40(12) or that is the making of a gift after December 8, 1997 that is not a gift described in subsection 110.1(1)) of a property in the period beginning at the beginning of its first taxation year (that began after the corporation last became a private corporation and that ended after 1971) and ending immediately before the particular time (in this definition referred to as “the period”)

(3) Clause (a)(i)(A) of the definition “cap-ital dividend account” in subsection 89(1) of the Act, as enacted by subsection (2), is replaced by the following:

(A) the amount of the corporation’s capital gain — computed without ref-erence to subparagraphs 52(3)(a)(ii) and 53(1)(b)(ii) — from the disposition (other than a disposition under paragraph 40(3.1)(a) or subsection 40(12) or a disposition that is the making of a gift after December 8, 1997 that is not a gift described in subsection 110.1(1)) of a property in the period beginning at the beginning of its first taxation year that began after the corporation last became a private corporation and that ended after 1971 and ending immediately before the particular time (in this definition referred to as “the period”)

(4) Clause (a)(ii)(A) of the definition “cap-ital dividend account” in subsection 89(1) of the Act is replaced by the following:

(A) the amount of the corporation’s capital loss — computed without reference to subparagraphs 52(3)(a)(ii) and 53(1)(b)(ii) — from the disposition (other than a disposition that is the making of a gift after December 8, 1997 that is not a gift described in subsection 110.1(1)) of a property in the period

(5) Clause (a)(ii)(A) of the definition “cap-ital dividend account” in subsection 89(1) of the Act, as enacted by subsection (4), is replaced by the following:

(A) the amount of the corporation’s capital loss — computed without reference to subparagraphs 52(3)(a)(ii) and 53(1)(b)(ii) — from the disposition (other than a disposition under subsection 40(3.12) or a disposition that is the making of a gift after December 8, 1997 that is not a gift described in subsection 110.1(1)) of a property in the period

(6) The portion of paragraph (f) of the definition “compte de dividendes en capital” in subsection 89(1) of the French version of the Act before clause (i)(B) is replaced by the following:

f) le total des montants représentant chacun un montant relatif à une distribution qu’une fiducie a effectuée sur ses gains en capital en faveur de la société au cours de la période et dont le montant est égal au moins élevé des montants suivants :

(i) l’excédent du montant visé à la division (A) sur le montant visé à la division (B) :

(A) le montant de la distribution,

(7) Clause (f)(i)(B) of the definition “capital dividend account” in subsection 89(1) of the Act is replaced by the following:

(B) the amount designated under subsection 104(21) by the trust (other than a designation to which subsection 104(21.4), as it read in its application to the corporation’s last taxation year that began before November 2011, applied) in respect of the net taxable capital gains of the trust attributable to those capital gains, and

(8) The portion of paragraph (g) of the definition “compte de dividendes en capital” in subsection 89(1) of the French version of the Act before subparagraph (ii) is replaced by the following:

g) le total des montants représentant chacun un montant relatif à une distribution qu’une fiducie a effectuée en faveur de la société au cours de la période au titre d’un dividende (sauf un dividende imposable) qui a été versé à la fiducie au cours d’une année d’imposition de celle-ci tout au long de laquelle elle a résidé au Canada, sur une action du capital-actions d’une autre société résidant au Canada, et dont le montant est égal au moins élevé des montants suivants :

(i) le montant de la distribution,

(9) Paragraph (b) of the definition “taxable Canadian corporation” in subsection 89(1) of the Act is replaced by the following:

(b) was not, by reason of a statutory provision other than paragraph 149(1)(t), exempt from tax under this Part;

(10) Subsections (1) and (4) apply in respect of dispositions that occur on or after November 9, 2006.

(11) Subsection (2) applies to dispositions that occur on or after March 22, 2011.

(12) Subsection (3) applies to dispositions under paragraph 40(3.1)(a) of the Act that occur after October 31, 2011.

(13) Subsection (5) applies to dispositions under subsection 40(3.12) of the Act that occur after October 31, 2011, other than dispositions that relate to amounts deemed under subsection 40(3.1) of the Act to have been a gain from a disposition that occurred before November 1, 2011.

(14) Subsections (6) and (8) apply to elections in respect of capital dividends that become payable after 1997.

(15) Subsection (7) applies to taxation years that begin after October 31, 2011.

(16) Subsection (9) applies in respect of taxation years that end after 1999.

226. (1) Subparagraph 91(4)(a)(ii) of the Act is replaced by the following:

(ii) the taxpayer’s relevant tax factor for the year, and

(2) Section 91 of the Act is amended by adding the following after subsection (4):

Denial of foreign accrual tax

(4.1) For the purposes of the definition “foreign accrual tax” in subsection 95(1), foreign accrual tax applicable to a particular amount included in computing a taxpayer’s income under subsection (1) for a taxation year of the taxpayer in respect of a particular foreign affiliate of the taxpayer is not to include the amount that would, in the absence of this subsection, be foreign accrual tax applicable to the particular amount if, at any time in the taxation year (referred to in this subsection as the “affiliate year”) of the particular affiliate that ends in the taxation year of the taxpayer,

(a) a specified owner in respect of the taxpayer is considered,

(i) under the income tax laws (referred to in subsections (4.5) and (4.6) as the “relevant foreign tax law”) of any country other than Canada under the laws of which any income of a particular corporation — that is, at any time in the affiliate year, a pertinent person or partnership in respect of the particular affiliate — is subject to income taxation, to own less than all of the shares of the capital stock of the particular corporation that are considered to be owned by the specified owner for the purposes of this Act, or

(ii) under the income tax laws (referred to in subsections (4.5) and (4.6) as the “relevant foreign tax law”) of any country other than Canada under the laws of which any income of a particular partnership — that is, at any time in the affiliate year, a pertinent person or partnership in respect of the particular affiliate — is subject to income taxation, to have a lesser direct or indirect share of the income of the particular partnership than the specified owner is considered to have for the purposes of this Act; or

(b) where the taxpayer is a partnership, the direct or indirect share of the income of the partnership of any member of the partnership that is, at any time in the affiliate year, a person resident in Canada or a foreign affiliate of such a person is, under the income tax laws (referred to in subsection (4.6) as the “relevant foreign tax law”) of any country other than Canada under the laws of which any income of the partnership is subject to income taxation, less than the member’s direct or indirect share of that income for the purposes of this Act.

Specified owner

(4.2) For the purposes of subsections (4.1) and (4.5), a “specified owner”, at any time, in respect of a taxpayer means the taxpayer or a person or partnership that is, at that time,

(a) a partnership of which the taxpayer is a member;

(b) a foreign affiliate of the taxpayer;

(d) a person or partnership referred to in any of subparagraphs (4.4)(a)(i) to (iii).

Pertinent person or partnership

(4.3) For the purposes of this subsection and subsection (4.1), a “pertinent person or partnership”, at any time, in respect of a particular foreign affiliate of a taxpayer means the particular affiliate or a person or partnership that is, at that time,

(a) another foreign affiliate of the taxpayer

(i) in which the particular affiliate has an equity percentage, or

(ii) that has an equity percentage in the particular affiliate;

(b) a partnership a member of which is at that time a pertinent person or partnership in respect of the particular affiliate under this subsection; or

Series of transactions

(4.4) For the purposes of subsections (4.2) and (4.3), if, as part of a series of transactions or events that includes the earning of the foreign accrual property income that gave rise to the particular amount referred to in subsection (4.1), a foreign affiliate (referred to in this subsection as the “funding affiliate”) of the taxpayer or of a person (referred to in this subsection as the “related person”) resident in Canada that is related to the taxpayer, or a partnership (referred to in this subsection as the “funding partnership”) of which such an affiliate is a member, directly or indirectly provided funding to the particular affiliate, or a partnership of which the particular affiliate is a member, otherwise than by way of loans or other indebtedness that are subject to terms or conditions made or imposed, in respect of the loans or other indebtedness, that do not differ from those that would be made or imposed between persons dealing at arm’s length or by way of an acquisition of shares of the capital stock of any corporation, then

(a) if the funding affiliate is, or the funding partnership has a member that is, a foreign affiliate of the related person, the following persons and partnerships are deemed, at all times during which the foreign accrual property income is earned by the particular affiliate, to be specified owners in respect of the taxpayer:

(i) the related person,

(ii) each foreign affiliate of the related person, and

(iii) each partnership a member of which is a person referred to in subparagraph (i) or (ii); and

(b) the following persons and partnerships are deemed, at all times during which the foreign accrual property income is earned by the particular affiliate, to be pertinent persons or partnerships in respect of the particular affiliate:

(i) the funding affiliate or the funding partnership,

(ii) a non-resident corporation

(A) in which the funding affiliate has an equity percentage, or

(B) that has an equity percentage in the funding affiliate, and

(iii) a partnership a member of which is a person or partnership referred to in subparagraph (i) or (ii).

Exception — hybrid entities

(4.5) For the purposes of subparagraph (4.1)(a)(i), a specified owner in respect of the taxpayer is not to be considered, under the relevant foreign tax law, to own less than all of the shares of the capital stock of a corporation that are considered to be owned for the purposes of this Act solely because the specified owner is not treated as a corporation under the relevant foreign tax law.

Exceptions — partnerships

(4.6) For the purposes of subparagraph (4.1)(a)(ii) and paragraph (4.1)(b), a member of a partnership is not to be considered to have a lesser direct or indirect share of the income of the partnership under the relevant foreign tax law than for the purposes of this Act solely because of one or more of the following:

(a) a difference between the relevant foreign tax law and this Act in the manner of

(i) computing the income of the partnership, or

(ii) allocating the income of the partnership because of the admission to, or withdrawal from, the partnership of any of its members;

(b) the treatment of the partnership as a corporation under the relevant foreign tax law; or

Deemed ownership

(4.7) For the purposes of subsection (4.1), if a specified owner owns, for the purposes of this Act, shares of the capital stock of a corporation and the dividends, or similar amounts, in respect of those shares are treated under the income tax laws of any country other than Canada under the laws of which any income of the corporation is subject to income taxation as interest or another form of deductible payment, the specified owner is deemed to be considered, under those tax laws, to own less than all of the shares of the capital stock of the corporation that are considered to be owned by the specified owner for the purposes of this Act.

(3) Subsection (1) applies to the 2002 and subsequent taxation years.

(4) Subsection (2) applies in respect of the computation of foreign accrual tax applicable to an amount included in computing a taxpayer’s income under subsection 91(1) of the Act, for a taxation year of the taxpayer that ends after March 4, 2010, in respect of a foreign affiliate of the taxpayer. However, for taxation years of the taxpayer that end on or before October 24, 2012,

(a) subsection 91(4.1) of the Act, as enacted by subsection (2), is to be read as follows:

(4.1) For the purposes of the definition “foreign accrual tax” in subsection 95(1), foreign accrual tax applicable to a particular amount included in computing a taxpayer’s income under subsection (1) for a taxation year in respect of a particular foreign affiliate of the taxpayer shall not include the amount that would, in the absence of this subsection, be foreign accrual tax applicable to the particular amount if the particular amount is earned during a period in which

(a) if the taxpayer is a partnership, the share of the income of any member of the partnership that is a person resident in Canada is, under the income tax laws (referred to in subsection (4.6) as the “relevant foreign tax law”) of any country, other than Canada, under the laws of which the income of the partnership is subject to income taxation, less than its share of the income for the purposes of this Act; or

(b) in any other case, the taxpayer is considered, under the income tax laws (referred to in subsection (4.5) as the “relevant foreign tax law”) of any country, other than Canada, under the laws of which the income of the particular affiliate is subject to income taxation, to own less than all of the shares of the capital stock of the particular affiliate, of another foreign affiliate of the taxpayer in which the particular affiliate has an equity percentage, or of another foreign affiliate of the taxpayer that has an equity percentage in the particular affiliate, that are considered to be owned by the taxpayer for the purposes of this Act.

(b) subsection 91(4.5) of the Act, as enacted by subsection (2), is to be read as follows:

(4.5) For the purposes of paragraph (4.1)(b), a taxpayer is not to be considered, under the relevant foreign tax law, to own less than all of the shares of the capital stock of a foreign affiliate of the taxpayer that are considered to be owned by the taxpayer for the purposes of this Act solely because the taxpayer or the foreign affiliate is not treated as a corporation under the relevant foreign tax law.

(c) the portion of subsection 91(4.6) of the Act before paragraph (a), as enacted by subsection (2), is to be read as follows:

(4.6) For the purposes of paragraph (4.1)(a), a member of a partnership is not to be considered to have a lesser share of the income of the partnership under the relevant foreign tax law than for the purposes of this Act solely because of one or more of the following:

(d) section 91 of the Act is to be read without reference to its subsections (4.2) to (4.4) and (4.7), as enacted by subsection (2).

227. (1) The definition “relevant tax factor” in subsection 95(1) of the Act is replaced by the following:

“relevant tax factor”
« facteur fiscal approprié »

“relevant tax factor”, of a person or partnership for a taxation year, means

(a) in the case of a corporation, or of a partnership all the members of which, other than non-resident persons, are corporations, the quotient obtained by the formula

1/(A – B)

where

A is the percentage set out in paragraph 123(1)(a), and

B is

(i) in the case of a corporation, the percentage that is the corporation’s general rate reduction percentage (as defined by section 123.4) for the taxation year, and

(ii) in the case of a partnership, the percentage that would be determined under subparagraph (i) in respect of the partnership if the partnership were a corporation whose taxation year is the partnership’s fiscal period, and

(b) in any other case, 2.2;

(2) The portion of the definition “foreign accrual tax” in subsection 95(1) of the Act before paragraph (a) is replaced by the following:

“foreign accrual tax”
« impôt étranger accumulé »

“foreign accrual tax” applicable to any amount included in computing a taxpayer’s income under subsection 91(1) for a taxation year in respect of a particular foreign affiliate of the taxpayer means, subject to subsection 91(4.1),

(3) Subsection (1) applies to the 2002 and subsequent taxation years.

(4) Subsection (2) applies to taxation years of a taxpayer that end after March 4, 2010.

228. (1) Section 96 of the Act is amended by adding the following after subsection (1):

Income allocation to former member

(1.01) If, at any time in a fiscal period of a partnership, a taxpayer ceases to be a member of the partnership

(a) for the purposes of subsection (1) and sections 34.1, 34.2, 101, 103 and 249.1, and notwithstanding paragraph 98.1(1)(d), the taxpayer is deemed to be a member of the partnership at the end of the fiscal period; and

(b) for the purposes of the application of paragraph (2.1)(b) and subparagraphs 53(1)(e)(i) and (viii) and (2)(c)(i) to the taxpayer, the fiscal period of the partnership is deemed to end

(i) immediately before the time at which the taxpayer is deemed by subsection 70(5) to have disposed of the interest in the partnership, where the taxpayer ceased to be a member of the partnership because of the taxpayer’s death, and

(ii) immediately before the time that is immediately before the time that the taxpayer ceased to be a member of the partnership, in any other case.

(2) Paragraph 96(1.01)(a) of the Act, as enacted by subsection (1), is replaced with the following:

(a) for the purposes of subsection (1), sections 34.1, 101 and 103 and paragraph 249.1(1)(b), and notwithstanding paragraph 98.1(1)(d), the taxpayer is deemed to be a member of the partnership at the end of the fiscal period; and

(3) The portion of paragraph 96(1.01)(b) of the Act before subparagraph (i), as enacted by subsection (1), is replaced by the following:

(b) for the purposes of the application of paragraph (2.1)(b), subsection 40(3.12) and subparagraphs 53(1)(e)(i) and (viii) and (2)(c)(i) to the taxpayer, the fiscal period of the partnership is deemed to end

(4) Paragraph 96(2.4)(a) of the English version of the Act is replaced by the following:

(a) by operation of any law governing the partnership arrangement, the liability of the member as a member of the partnership is limited (except by operation of a provision of a statute of Canada or a province that limits the member’s liability only for debts, obligations and liabilities of the partnership, or any member of the partnership, arising from negligent acts or omissions, from misconduct or from fault of another member of the partnership or an employee, an agent or a representative of the partnership in the course of the partnership business while the partnership is a limited liability partnership);

(5) The portion of subsection 96(3) of the Act before paragraph (a) is replaced by the following:

Agreement or election of partnership members

(3) If a taxpayer who was a member of a partnership at any time in a fiscal period has, for any purpose relevant to the computation of the taxpayer’s income from the partnership for the fiscal period, made or executed an agreement, designation or election under or in respect of the application of any of subsections 13(4), (4.2) and (16) and 14(1.01), (1.02) and (6), section 15.2, subsections 20(9) and 21(1) to (4), section 22, subsection 29(1), section 34, clause 37(8)(a)(ii)(B), subsections 44(1) and (6), 50(1) and 80(5) and (9) to (11), section 80.04 and subsections 86.1(2), 97(2), 139.1(16) and (17) and 249.1(4) and (6) that, if this Act were read without reference to this subsection, would be a valid agreement, designation or election,

(6) Subsection 96(9) of the Act is replaced by the following:

Application of foreign partnership rule

(9) For the purposes of applying subsection (8) and this subsection,

(a) where it can reasonably be considered that one of the main reasons that a member of a partnership is resident in Canada is to avoid the application of subsection (8), the member is deemed not to be resident in Canada; and

(b) where at any time a particular partnership is a member of another partnership,

(i) each person or partnership that is, at that time, a member of the particular partnership is deemed to be a member of the other partnership at that time,

(ii) each person or partnership that becomes a member of the particular partnership at that time is deemed to become a member of the other partnership at that time, and

(iii) each person or partnership that ceases to be a member of the particular partnership at that time is deemed to cease to be a member of the other partnership at that time.

(7) Subsection (1) applies in respect of a taxpayer

(a) in the case where the taxpayer ceases to be a member of a partnership because of the taxpayer’s death, to the 2003 and subsequent taxation years; and

(b) in any other case, to the 1995 and subsequent taxation years.

(8) Subsection (2) applies in respect of a taxpayer to taxation years that end after March 22, 2011.

(9) Subsection (3) applies in respect of a taxpayer to taxation years that end after October 31, 2011.

(10) Subsection (4) is deemed to have come into force on June 21, 2001.

(11) If a taxpayer, who is a member of a partnership at the end of a particular fiscal period, of the partnership, that ends in the taxpayer’s 2000 taxation year, so elects in writing and files the election with the Minister of National Revenue on or before the taxpayer’s filing-due date for the taxpayer’s taxation year in which this Act receives royal assent,

(a) subsection 96(1.7) of the Act does not apply to the taxpayer’s 2000 taxation year;

(b) the taxpayer is deemed to have a capital gain, a capital loss or a business investment loss in respect of the partnership for the particular fiscal period equal to the amount of the taxable capital gain, the allowable capital loss or the allowable business investment loss in respect of the partnership for the particular fiscal period, as the case may be, multiplied by the reciprocal of the fraction in paragraph 38(a) of the Act that applies to the partnership for the particular fiscal period;

(c) the amount of a capital gain, a capital loss or a business investment loss determined under paragraph (b) is deemed to be a capital gain, a capital loss or a business investment loss, as the case may be, of the taxpayer from a disposition of a capital property on the day that the particular fiscal period ends; and

(d) except as provided by this subsection, no amount shall be included in computing the taxpayer’s taxable capital gains, allowable capital losses and allowable business investment losses in respect of the taxable capital gains, allowable capital losses and allowable business investment losses of the partnership for the particular fiscal period.

(12) Subsection (5) applies to taxation years that end after February 27, 2000. However, subsection 96(3) of the Act, as enacted by subsection (5), is before December 21, 2002 to be read without reference to “, (4.2)” and “, (1.02)”.

(13) Subsection (6) applies to fiscal periods that begin after June 22, 2000.

229. Subsection 99(1) of the Act is replaced by the following:

Fiscal period of terminated partnership

99. (1) Subject to subsection (2), if, at any particular time in a fiscal period of a partnership, the partnership would, if this Act were read without reference to subsection 98(1), have ceased to exist, the fiscal period is deemed to have ended immediately before the time that is immediately before that particular time.

230. (1) Section 100 of the Act is amended by adding the following after subsection (4):

Replacement of partnership capital

(5) A taxpayer who pays an amount at any time in a taxation year is deemed to have a capital loss from a disposition of property for the year if

(a) the taxpayer disposed of an interest in a partnership before that time or, because of subsection (3), acquired before that time a right to receive property of a partnership;

(b) that time is after the disposition or acquisition, as the case may be;

(c) the amount would have been described in subparagraph 53(1)(e)(iv) had the taxpayer been a member of the partnership at that time; and

(d) the amount is paid pursuant to a legal obligation of the taxpayer to pay the amount.

(2) Subsection (1) applies to the 1995 and subsequent taxation years.

231. (1) The portion of subsection 104(1.1) of the Act before paragraph (a) is replaced by the following:

Restricted meaning of “beneficiary”

(1.1) Notwithstanding subsection 248(25), for the purposes of subsection (1), paragraph (4)(a.4), subparagraph 73(1.02)(b)(ii) and paragraph 107.4(1)(e), a person or partnership is deemed not to be a beneficiary under a trust at a particular time if the person or partnership is beneficially interested in the trust at the particular time solely because of

(2) Subparagraph 104(4)(a)(i.1) of the Act is replaced by the following:

(i.1) is a trust that was created by the will of a taxpayer who died after 1971 to which property was transferred in circumstances to which paragraph 70(5.2)(c) (or, in the case of a transfer that occurred in a taxation year before 2007, (b) or (d), as those paragraphs read in their application to that taxation year) or (6)(d) applied, and that, immediately after any such property vested indefeasibly in the trust as a consequence of the death of the taxpayer, was a trust,

(3) Paragraph 104(4)(a.2) of the French version of the Act is replaced by the following:

a.2) lorsque la fiducie effectue une distribution à un bénéficiaire au titre de la participation de celui-ci à son capital, qu’il est raisonnable de conclure que la distribution a été financée par une dette de la fiducie et que l’une des raisons pour lesquelles la dette a été contractée était d’éviter des impôts payables par ailleurs en vertu de la présente partie par suite du décès d’un particulier, le jour où la distribution est effectuée (déterminé comme si, pour la fiducie, la fin d’un jour correspondait au moment immédiatement après celui où elle distribue un bien à un bénéficiaire au titre de la participation de celui-ci à son capital);

(4) Subsections 104(5.3) to (5.7) of the Act are repealed.

(5) Subsections 104(10) and (11) of the Act are repealed.

(6) Paragraph 104(13.2)(a) of the Act is replaced by the following:

(a) for the purposes of subsections (13) and 105(2) (except in the application of subsection (13) for the purposes of subsection (21)), be deemed not to have been paid or to have become payable in the year to or for the benefit of the beneficiary or out of income of the trust; and

(7) Subsection 104(19) of the Act is replaced by the following:

Designation in respect of taxable dividends

(19) A portion of a taxable dividend received by a trust, in a particular taxation year of the trust, on a share of the capital stock of a taxable Canadian corporation is, for the purposes of this Act other than Part XIII, deemed to be a taxable dividend on the share received by a taxpayer, in the taxpayer’s taxation year in which the particular taxation year ends, and is, for the purposes of paragraphs 82(1)(b) and 107(1)(c) and (d) and section 112, deemed not to have been received by the trust, if

(a) an amount equal to that portion

(i) is designated by the trust, in respect of the taxpayer, in the trust’s return of income under this Part for the particular taxation year, and

(ii) may reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust) to be part of the amount that, because of paragraph (13)(a), subsection (14) or section 105, was included in computing the income for that taxation year of the taxpayer;

(b) the taxpayer is in the particular taxation year a beneficiary under the trust;

(d) the total of all amounts each of which is an amount designated, under this subsection, by the trust in respect of a beneficiary under the trust in the trust’s return of income under this Part for the particular taxation year is not greater than the total of all amounts each of which is the amount of a taxable dividend, received by the trust in the particular taxation year, on a share of the capital stock of a taxable Canadian corporation.

(8) Subsection 104(21) of the Act is replaced by the following:

Designation in respect of taxable capital gains

(21) For the purposes of sections 3 and 111, except as they apply for the purposes of section 110.6, and subject to paragraph 132(5.1)(b), an amount in respect of a trust’s net taxable capital gains for a particular taxation year of the trust is deemed to be a taxable capital gain, for the taxation year of a taxpayer in which the particular taxation year ends, from the disposition by the taxpayer of capital property if

(a) the amount

(i) is designated by the trust, in respect of the taxpayer, in the trust’s return of income under this Part for the particular taxation year, and

(b) the taxpayer is

(i) in the particular taxation year, a beneficiary under the trust, and

(ii) resident in Canada, unless the trust is, throughout the particular taxation year, a mutual fund trust;

(d) the total of all amounts each of which is an amount designated, under this subsection, by the trust in respect of a beneficiary under the trust in the trust’s return of income under this Part for the particular taxation year is not greater than the trust’s net taxable capital gains for the particular taxation year.

(9) Subsection 104(21.1) of the Act is repealed.

(10) Paragraph 104(21.3)(a) of the Act is replaced by the following:

(a) the total of all amounts each of which is an allowable capital loss (other than an allowable business investment loss) of the trust for the year from the disposition of a capital property, and

(11) Subsection 104(21.3) of the Act, as amended by subsection (10), is replaced by the following:

Net taxable capital gains of trust determined

(21.3) For the purposes of this section, the net taxable capital gains of a trust for a taxation year is the amount, if any, determined by the formula

A + B – C – D

where

A is the total of all amounts each of which is a taxable capital gain of the trust for the year from the disposition of a capital property that was held by the trust immediately before the disposition,

B is the total of all amounts each of which is deemed by subsection (21) to be a taxable capital gain of the trust for the year,

C is the total of all amounts each of which is an allowable capital loss (other than an allowable business investment loss) of the trust for the year from the disposition of a capital property, and

D is the amount, if any, deducted under paragraph 111(1)(b) in computing the trust’s taxable income for the year.

(12) Subsections 104(21.4) and (21.5) of the Act are repealed.

(13) Paragraph 104(21.6)(g) of the Act is replaced by the following:

(f.1) if the deemed gains are in respect of capital gains of the trust from dispositions of property after February 27, 2000 and before October 17, 2000 and the taxation year of the taxpayer began after February 27, 2000 and ended after October 17, 2000, the deemed gains are deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year and in the period that began after February 27, 2000 and ended before October 18, 2000;

(g) if the deemed gains are in respect of capital gains of the trust from dispositions of property after February 27, 2000 and before October 17, 2000 and the taxation year of the taxpayer began after February 27, 2000 and ended before October 18, 2000, the deemed gains are deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year; and

(14) Subsection 104(21.6), as amended by subsection (13), and subsection (21.7) of the Act are repealed.

(15) Subsection 104(22) of the Act is replaced by the following:

Designation in respect of foreign source income

(22) For the purposes of this subsection, subsection (22.1) and section 126, an amount in respect of a trust’s income for a particular taxation year of the trust from a source in a country other than Canada is deemed to be income of a taxpayer, for the taxation year of the taxpayer in which the particular taxation year ends, from that source if

(a) the amount

(i) is designated by the trust, in respect of the taxpayer, in the trust’s return of income under this Part for the particular taxation year, and

(ii) may reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust) to be part of the amount that, because of paragraph (13)(a) or subsection (14), was included in computing the income for that taxation year of the taxpayer;

(b) the taxpayer is in the particular taxation year a beneficiary under the trust;

(d) the total of all amounts each of which is an amount designated, under this subsection in respect of that source, by the trust in respect of a beneficiary under the trust in the trust’s return of income under this Part for the particular taxation year is not greater than the trust’s income for the particular taxation year from that source.

(16) Paragraphs 104(23)(a) and (b) of the Act are repealed.

(17) Subsection (1) applies to the 1998 and subsequent taxation years.

(18) Subsection (2) applies to trust taxation years that begin after 2006.

(19) Subsections (4), (9), (11), (12) and (14) apply to taxation years that begin after October 31, 2011.

(20) Subsection (5) applies to the 2005 and subsequent taxation years.

(21) Subsections (7), (8) and (15) apply to taxation years that end after February 27, 2004, except that, for taxation years that end on or before July 18, 2005, the reference to “paragraph (13)(a)” in subparagraph 104(19)(a)(ii) of the Act, as enacted by subsection (7), in subparagraph 104(21)(a)(ii) of the Act, as enacted by subsection (8), and in subparagraph 104(22)(a)(ii) of the Act, as enacted by subsection (15), is to be read as a reference to “subsection (13)”.

(22) Subsection (10) applies to trust taxation years that begin after 2000.

(23) Paragraph 104(21.6)(f.1) of the Act, as enacted by subsection (13), applies to taxation years that end after February 27, 2000.

(24) Paragraph 104(21.6)(g) of the Act, as enacted by subsection (13), applies to trust taxation years that end after December 20, 2002.

(25) Subsection (16) is deemed to have come into force on December 21, 2002.

232. Subsection 106(3) of the French version of the Act is replaced by the following:

Produit de disposition d’une participation au revenu

(3) Il est entendu que la fiducie qui, à un moment donné, distribue un de ses biens à un contribuable qui était un de ses bénéficiaires, en règlement total ou partiel de la participation du contribuable au revenu de la fiducie, est réputée avoir disposé du bien pour un produit égal à la juste valeur marchande du bien à ce moment.

233. (1) Subsection 107(1) of the Act is amended by striking out “and” at the end of paragraph (c), by adding “and” at the end of paragraph (d) and by adding the following after paragraph (d):

(e) if the capital interest is not a capital property of the taxpayer, notwithstanding the definition “cost amount” in subsection 108(1), its cost amount is deemed to be the amount, if any, by which

(i) the amount that would, if this Act were read without reference to this paragraph and the definition “cost amount” in subsection 108(1), be its cost amount

exceeds

(ii) the total of all amounts, each of which is an amount in respect of the capital interest that has become payable to the taxpayer before the disposition and that would be described in subparagraph 53(2)(h)(i.1) if that subparagraph were read without reference to its subclause (B)(I).

(2) Section 107 of the Act is amended by adding the following after subsection (1.1):

Deemed fair market value — non-capital property

(1.2) For the purpose of section 10, the fair market value at any time of a capital interest in a trust is deemed to be equal to the amount that is the total of

(a) the amount that would, if this Act were read without reference to this subsection, be its fair market value at that time, and

(b) the total of all amounts, each of which is an amount that would be described, in respect of the capital interest, in subparagraph 53(2)(h)(i.1) if that subparagraph were read without reference to its subclause (B)(I), that has become payable to the taxpayer before that time.

(3) Subparagraph 107(2)(b.1)(iii) of the Act is replaced by following:

(iii) in any other case, 50%;

(4) The portion of paragraph 107(2)(c) of the Act before subparagraph (i) is replaced by the following:

(c) the taxpayer’s proceeds of disposition of the capital interest in the trust (or of the part of it) disposed of by the taxpayer on the distribution are deemed to be equal to the amount, if any, by which

(5) The portion of paragraph 107(2)(d) of the French version of the Act before subparagraph (i) is replaced by the following:

d) lorsque les biens ainsi distribués étaient des biens amortissables de la fiducie, appartenant à une catégorie prescrite, et que le montant du coût en capital de ces biens, supporté par la fiducie, dépasse le coût que le contribuable est réputé, en vertu du présent article, avoir supporté pour les acquérir, pour l’application des articles 13 et 20 et des dispositions réglementaires prises en vertu de l’alinéa 20(1)a) :

(6) The portion of paragraph 107(2)(f) of the French version of the Act before subparagraph (i) is replaced by the following:

f) lorsque les biens ainsi distribués étaient des immobilisations admissibles de la fiducie au titre de son entreprise :

(7) The portion of subparagraph 107(2)(f)(ii) of the French version of the Act after the formula is replaced by the following:

où :

A représente le montant calculé selon cet élément Q au titre de l’entreprise de la fiducie immédiatement avant la distribution;

B la juste valeur marchande, immédiatement avant la distribution, des biens ainsi distribués;

C la juste valeur marchande, immédiatement avant la distribution, de l’ensem-ble des immobilisations admissibles de la fiducie au titre de l’entreprise.

(8) Subsection 107(2.001) of the French version of the Act is replaced by the following:

Roulement — choix d’une fiducie

(2.001) Lorsqu’une fiducie distribue un bien à l’un de ses bénéficiaires en règlement total ou partiel de la participation de celui-ci à son capital, le paragraphe (2) ne s’applique pas à la distribution si la fiducie en fait le choix dans un formulaire prescrit présenté au ministre avec sa déclaration de revenu pour son année d’imposition où le bien est distribué et si l’un des faits ci-après se vérifie :

a) la fiducie réside au Canada au moment de la distribution;

b) le bien est un bien canadien imposable;

c) le bien est soit une immobilisation utilisée dans le cadre d’une entreprise que la fiducie exploite par l’entremise d’un établissement stable (au sens du règlement) au Canada immédiatement avant la distribution, soit une immobilisation admissible au titre d’une telle entreprise, soit un bien à porter à l’inventaire d’une telle entreprise.

(9) The portion of subsection 107(2.002) of the French version of the Act before paragraph (b) is replaced by the following:

Roulement — choix d’un bénéficiaire

(2.002) Lorsqu’une fiducie non-résidente distribue un bien (sauf celui visé aux alinéas (2.001)b) ou c)) à l’un de ses bénéficiaires en règlement total ou partiel de la participation de celui-ci à son capital, les règles ci-après s’appliquent si le bénéficiaire en fait le choix en vertu du présent paragraphe dans un formulaire prescrit présenté au ministre avec sa déclaration de revenu pour son année d’imposition où le bien est distribué :

a) le paragraphe (2) ne s’applique pas à la distribution;

(10) The portion of subsection 107(2.01) of the French version of the Act before paragraph (a) is replaced by the following:

Distribution de résidence principale

(2.01) Lorsqu’une fiducie personnelle distribue à un moment donné, à un contribuable dans les circonstances visées au paragraphe (2), un bien qui serait sa résidence principale, au sens de l’article 54, pour une année d’imposition si elle l’avait désigné comme telle en application de l’alinéa c.1) de la définition de « résidence principale » à cet article, les règles ci-après s’appliquent si la fiducie en fait le choix dans sa déclaration de revenu pour l’année d’imposition qui comprend ce moment :

(11) The portion of paragraph 107(2.1)(c) of the French version of the Act before subparagraph (i) is replaced by the following:

c) sous réserve de l’alinéa e), le produit de disposition, pour le bénéficiaire, de la partie de l’ancienne participation dont il a disposé au moment de la distribution est réputé être égal à l’excédent :

(12) The portion of subparagraph 107(2.1)(d)(iii) of the French version of the Act before clause (B) is replaced by the following:

(iii) le produit de disposition, pour le bénéficiaire, de la partie de l’ancienne participation dont il a disposé au moment de la distribution est réputé être égal à l’excédent de la juste valeur marchande du bien sur le total des montants suivants :

(A) la partie du montant de la distribution qui est un paiement auquel s’applique l’alinéa h) ou i) de la définition de « disposition » au paragraphe 248(1),

(13) Paragraph 107(2.1)(e) of the French version of the Act is replaced by the following:

e) lorsque la fiducie est une fiducie de fonds commun de placement, que la distribution est effectuée au cours d’une de ses années d’imposition qui est antérieure à son année d’imposition 2003, qu’elle a fait, pour l’année, le choix prévu au paragraphe (2.11) et qu’elle en fait le choix relativement à la distribution dans le formulaire prescrit produit avec sa déclaration de revenu pour l’année :

(i) il n’est pas tenu compte de l’alinéa c),

(ii) le produit de disposition, pour le bénéficiaire, de la partie de l’ancienne participation dont il a disposé lors de la distribution est réputé être égal au montant déterminé selon l’alinéa a).

(14) Subsection 107(2.11) of the Act is replaced by the following:

Gains not distributed to beneficiaries

(2.11) If a trust that is resident in Canada for a taxation year makes in the taxation year one or more distributions to which subsection (2.1) applies and the trust elects in prescribed form filed with the trust’s return for the year or a preceding taxation year to have one of the following paragraphs apply, the income of the trust for the year (determined without reference to subsection 104(6)) shall, for the purposes of subsections 104(6) and (13), be computed without regard

(a) if the election is to have this paragraph apply, to all of those distributions (other than distributions of cash denominated in Canadian dollars) to non-resident persons (including a partnership other than a Canadian partnership); and

(b) if the election is to have this paragraph apply, to all of those distributions (other than distributions of cash denominated in Canadian dollars).

(15) The portion of subsection 107(2.2) of the French version of the Act before paragraph (a) is replaced by the following:

Entité intermédiaire

(2.2) Lorsque, à un moment antérieur à 2005, une fiducie visée aux alinéas h), i) ou j) de la définition de « entité intermédiaire » au paragraphe 39.1(1) distribue des biens à l’un de ses bénéficiaires en règlement de tout ou partie des participations de celui-ci dans la fiducie et que le bénéficiaire présente au ministre, au plus tard à la date d’échéance de production qui lui est applicable pour son année d’imposition qui comprend ce moment, un choix concernant les biens sur le formulaire prescrit, le moins élevé des montants ci-après est à inclure dans le coût, pour le bénéficiaire, d’un bien (sauf de l’argent) qu’il a reçu dans le cadre de la distribution :

(16) The portion of subsection 107(4) of the French version of the Act before paragraph (a) is replaced by the following:

Fiducie en faveur de l’époux, du conjoint de fait ou de soi-même

(4) Si les conditions ci-après sont réunies, le paragraphe (2.1), mais non le paragraphe (2), s’applique au bien qu’une fiducie visée à l’alinéa 104(4)a) distribue à un bénéficiaire :

(17) Paragraph 107(4)(b) of the Act is replaced by the following:

(b) the distribution of the property occurs on or before the earlier of

(i) a reacquisition, in respect of any property of the trust, that occurs immediately after the day described by paragraph 104(4)(a), and

(ii) the cessation of the trust’s existence.

(18) The portion of subsection 107(4.1) of the French version of the Act before paragraph (b) is replaced by the following:

Cas d’application du paragraphe 75(2) à une fiducie

(4.1) Si les conditions ci-après sont réunies, le paragraphe (2.1), mais non le paragraphe (2), s’applique à la distribution d’un bien d’une fiducie personnelle donnée ou une fiducie donnée visée par règlement, effectuée par la fiducie donnée à un contribuable bénéficiaire de cette fiducie :

a) la distribution a été effectuée en règlement de la totalité ou d’une partie de la participation du contribuable au capital de la fiducie donnée;

(19) The portion of paragraph 107(4.1)(b) of the Act before subparagraph (i), as enacted by subsection 11(1), is replaced by the following:

(b) subsection 75(2) was applicable, or would have been applicable if it were read without reference to the phrase “while the person is resident in Canada” and subsection 75(3) were read without reference to paragraph (c.2), at a particular time in respect of any property of

(20) Subparagraph 107(4.1)(b)(ii) of the French version of the Act is replaced by the following:

(ii) soit d’une fiducie comptant parmi ses biens un bien qui, par suite d’une ou de plusieurs dispositions auxquelles le paragraphe 107.4(3) s’est appliqué, est devenu un bien de la fiducie donnée, lequel bien, après le moment donné et avant la distribution, n’a pas fait l’objet d’une disposition pour un produit de disposition égal à sa juste valeur marchande au moment de la disposition;

(21) Paragraph 107(4.1)(d) of the French version of the Act is replaced by the following:

d) la personne visée au sous-alinéa c)(i) existait au moment de la distribution du bien.

(22) Subsection 107(5) of the Act is replaced by the following:

Distribution of property received on qualifying disposition

(4.2) Subsection (2.1) applies (and subsection (2) does not apply) at any time to property distributed after December 20, 2002 to a beneficiary by a personal trust or a trust prescribed for the purpose of subsection (2), if

(a) at a particular time before December 21, 2002 there was a qualifying disposition (within the meaning assigned by subsection 107.4(1)) of the property, or of other property for which the property is substituted, by a particular partnership or a particular corporation, as the case may be, to a trust; and

(b) the beneficiary is neither the particular partnership nor the particular corporation.

Distribution to non-resident

(5) Subsection (2.1) applies (and subsection (2) does not apply) in respect of a distribution of a property (other than a share of the capital stock of a non-resident-owned investment corporation or property described in any of subparagraphs 128.1(4)(b)(i) to (iii)) by a trust to a non-resident taxpayer (including a partnership other than a Canadian partnership) in satisfaction of all or part of the taxpayer’s capital interest in the trust.

(23) The portion of subsection 107(5.1) of the Act before paragraph (b) is replaced by the following:

Instalment interest

(5.1) If, solely because of the application of subsection (5), paragraphs (2)(a) to (c) do not apply to a distribution in a taxation year of taxable Canadian property by a trust, in applying sections 155 and 156 and subsections 156.1(1) to (3) and 161(2), (4) and (4.01) and any regulations made for the purposes of those provisions, the trust’s tax payable under this Part for the year is deemed to be the lesser of

(a) the trust’s tax payable under this Part for the year, determined before taking into consideration the specified future tax consequences for the year, and

(24) Paragraph 107(5.1)(b) of the French version of the Act is replaced by the following:

b) le montant qui serait déterminé selon l’alinéa a) si le paragraphe (5) ne s’appliquait pas à chaque distribution, effectuée au cours de l’année, de biens canadiens imposables auxquels les règles énoncées au paragraphe (2) ne s’appliquent pas par le seul effet du paragraphe (5).

(25) Paragraphs 107(6)(a) and (b) of the Act are replaced by the following:

(a) the property or property for which it was substituted was held by a trust; and

(b) either

(i) the trust was non-resident and the property (or property for which it was substituted) was not taxable Canadian property of the trust, or

(ii) neither the vendor — nor a person that would, if section 251.1 were read without reference to the definition “controlled” in subsection 251.1(3), be affiliated with the vendor — had a capital interest in the trust.

(26) Subsections (1) and (2) apply to dispositions that occur, and valuations made,

(a) after 2001 in respect of qualified trust units, as defined in subsection 260(1) of the Act, as amended by subsection 365(5), in respect of which an amount described in paragraph 260(5.1)(b) of the Act, as enacted by subsection 365(7), or that would have been so described had no election been made under paragraph 365(12)(b), is paid after 2001 and before February 28, 2004, except that subparagraph 107(1)(e)(ii) of the Act, as enacted by subsection (1), and paragraph 107(1.2)(b) of the Act, as enacted by subsection (2), are, with respect to amounts described in subclause 53(2)(h)(i.1)(B)(I) of the Act that were payable on or before 2002, to be read without reference to the words “if that subparagraph were read without reference to its subclause (B)(I)”; and

(b) in any other case, after February 27, 2004, except that, subject to paragraph (a),

(i) subsection (1) does not apply to a disposition by a taxpayer after February 27, 2004 and before 2005 pursuant to an agreement in writing made by the taxpayer on or before February 27, 2004, and

(ii) subparagraph 107(1)(e)(ii) of the Act, as enacted by subsection (1), and paragraph 107(1.2)(b) of the Act, as enacted by subsection (2), are, with respect to amounts described in subclause 53(2)(h)(i.1)(B)(I) of the Act that were payable on or before February 27, 2004, to be read without reference to the words “if that subparagraph were read without reference to its subclause (B)(I)”.

(27) Subsection (3) and subsection 107(4.2) of the Act, as enacted by subsection (22), apply to distributions made after December 20, 2002.

(28) Subsection (4) applies to distributions made after 1999.

(29) Subsection (14) applies to the 2002 and subsequent taxation years. It also applies to the 2000 and 2001 taxation years of a trust if the trust so elects, by notifying the Minister of National Revenue in writing on or before its filing-due date for its taxation year that includes the day on which this Act receives royal assent, in which case the portion of subsection 107(2.11) of the Act, as enacted by subsection (14), before paragraph (a), is to be read as follows for the 2000 and 2001 taxation years of the trust:

(2.11) If a trust that is resident in Canada for a taxation year makes in the taxation year one or more distributions to which subsection (2.1) applies (or, in the case of property distributed after October 1, 1996 and before 2000, in circumstances in which subsection (5) applied) and the trust elects in prescribed form filed with the trust’s return for the year or a preceding taxation year, the income of the trust for the year (determined without reference to subsection 104(6)) shall, for the purposes of subsections 104(6) and (13), be computed without regard

(30) Subsections (17), (19) and (23) apply to distributions made after October 31, 2011.

(31) Subsection 107(5) of the Act, as enacted by subsection (22), applies to distributions made after February 27, 2004.

(32) Subsection (25) applies to dispositions made after October 31, 2011.

234. (1) The portion of section 107.2 of the French version of the Act before paragraph (a) is replaced by the following:

Montant provenant d’une fiducie de convention de retraite

107.2 Pour l’application de la présente partie et de la partie XI.3, dans le cas où, à un moment donné, une fiducie régie par une convention de retraite distribue un de ses biens à un contribuable bénéficiaire de la fiducie, en règlement de la totalité ou d’une partie de la participation de celui-ci dans la fiducie, les règles ci-après s’appliquent :

(2) Paragraph 107.2(b) of the French version of the Act is replaced by the following:

b) la fiducie est réputée verser au contribuable, au titre d’une distribution, une somme égale à cette juste valeur marchande;

235. (1) The portion of subsection 107.4(1) of the Act before paragraph (a) is replaced by the following:

Qualifying disposition

107.4 (1) In this section, a “qualifying disposition” of a property means a disposition of the property before December 21, 2002 by a person or partnership, and a disposition of property after December 20, 2002 by an individual, (which person, partnership or individual is referred to in this subsection as the “contributor”) as a result of a transfer of the property to a particular trust where

(2) Paragraph 107.4(1)(c) of the Act is replaced by the following:

(3) Paragraph 107.4(1)(d) of the Act is repealed.

(4) Subparagraphs 107.4(1)(g)(ii) and (iii) of the French version of the Act are replaced by the following:

(ii) celle commençant après le 17 décembre 1999 et comprenant la disposition de la totalité ou d’une partie d’une participation au capital ou d’une participation au revenu d’une fiducie personnelle, sauf une disposition effectuée uniquement par suite de la distribution d’un bien, d’une fiducie à une personne ou à une société de personnes, en règlement de la totalité ou d’une partie de cette participation,

(iii) celle commençant après le 5 juin 2000 et comprenant le transfert d’un bien à la fiducie donnée, effectué en contrepartie de l’acquisition d’une participation au capital de cette fiducie, s’il est raisonnable de considérer que celle-ci a reçu le bien en vue de financer une distribution (sauf celle qui correspond au produit de disposition d’une participation au capital de la fiducie);

(5) Subsections (1) and (3) are deemed to have come into force on December 20, 2002.

(6) Subsection (2) applies to dispositions that occur after February 27, 2004.

236. (1) Paragraph (a.1) of the definition “cost amount” in subsection 108(1) of the Act is replaced by the following:

(a.1) where that time (in this paragraph referred to as the “particular time”) is immediately before the time that is immediately before the time of the death of the taxpayer and subsection 104(4) or (5) deems the trust to dispose of property at the end of the day that includes the particular time, the amount that would be determined under paragraph (b) if the taxpayer had died on a day that ended immediately before the time that is immediately before the particular time, and

(2) The portion of the definition “testamentary trust” in subsection 108(1) of the Act before paragraph (a) is replaced by the following:

“testamentary trust”
« fiducie testamentaire »

“testamentary trust”, in a taxation year, means a trust that arose on and as a consequence of the death of an individual (including a trust referred to in subsection 248(9.1)), other than

(3) The definition “testamentary trust” in subsection 108(1) of the Act is amended by striking out “and” at the end of paragraph (b), by adding “and” at the end of paragraph (c) and by adding the following after paragraph (c):

(d) a trust that, at any time after December 20, 2002 and before the end of the taxation year, incurs a debt or any other obligation owed to, or guaranteed by, a beneficiary or any other person or partnership (which beneficiary, person or partnership is referred to in this paragraph as the “specified party”) with whom any beneficiary of the trust does not deal at arm’s length, other than a debt or other obligation

(i) incurred by the trust in satisfaction of the specified party’s right as a beneficiary under the trust

(A) to enforce payment of an amount of the trust’s income or capital gains payable at or before that time by the trust to the specified party, or

(B) to otherwise receive any part of the capital of the trust,

(ii) owed to the specified party, if the debt or other obligation arose because of a service (for greater certainty, not including any transfer or loan of property) rendered by the specified party to, for or on behalf of the trust,

(iii) owed to the specified party, if

(A) the debt or other obligation arose because of a payment made by the specified party for or on behalf of the trust,

(B) in exchange for the payment (and in full settlement of the debt or other obligation), the trust transfers property, the fair market value of which is not less than the principal amount of the debt or other obligation, to the specified party within 12 months after the payment was made (or, if written application has been made to the Minister by the trust within that 12-month period, within any longer period that the Minister considers reasonable in the circumstances), and

(C) it is reasonable to conclude that the specified party would have been willing to make the payment if the specified party dealt at arm’s length with the trust, except where the trust is the individual’s estate and that payment was made within the first 12 months after the individual’s death (or, if written application has been made to the Minister by the estate within that 12-month period, within any longer period that the Minister considers reasonable in the circumstances), or

(iv) incurred by the trust before October 24, 2012 if, in full settlement of the debt or other obligation the trust transfers property, the fair market value of which is not less than the principal amount of the debt or other obligation, to the person or partnership to whom the debt or other obligation is owed within 12 months after the day on which the Technical Tax Amendments Act, 2012 receives royal assent (or if written application has been made to the Minister by the trust within that 12-month period, within any longer period that the Minister considers reasonable in the circumstances);

(4) Paragraph (a.1) of the definition “trust” in subsection 108(1) of the Act is replaced by the following:

(a.1) a trust (other than a trust described in paragraph (a) or (d), a trust to which subsection 7(2) or (6) applies or a trust prescribed for the purpose of subsection 107(2)) all or substantially all of the property of which is held for the purpose of providing benefits to individuals each of whom is provided with benefits in respect of, or because of, an office or employment or former office or employment of any individ-ual,

(5) The portion of the definition “trust” in subsection 108(1) of the Act after paragraph (e.1) and before paragraph (f) is replaced by the following:

and, in applying subsections 104(4), (5), (5.2), (12), (14) and (15) at any time, does not include

(6) Subparagraph (g)(ii) of the definition “trust” in subsection 108(1) of the Act is repealed.

(7) Paragraph (a) of the definition “coût indiqué” in subsection 108(1) of the French version of the Act is replaced by the following:

a) dans le cas où de l’argent ou un autre bien de la fiducie a été distribué par celle-ci au contribuable en règlement de tout ou partie de sa participation au capital (lors de la liquidation de la fiducie ou autrement), du total des montants suivants :

(i) l’argent ainsi distribué,

(ii) les sommes représentant chacune le coût indiqué pour la fiducie, immédiatement avant la distribution, de chacun de ces autres biens,

(8) Subparagraphs (g)(v) and (vi) of the definition “fiducie” in subsection 108(1) of the French version of the Act are replaced by the following:

(v) la fiducie dont les modalités prévoient, à ce moment, que la totalité ou une partie de la participation d’une personne dans la fiducie doit prendre fin par rapport à une période (y compris celle déterminée par rapport au décès de la personne), autrement que par l’effet des modalités de la fiducie selon lesquelles une participation dans la fiducie doit prendre fin par suite de la distribution à la personne (ou à sa succession) d’un bien de la fiducie, si la juste valeur marchande du bien à distribuer doit être proportionnelle à celle de cette participation immédiatement avant la distribution,

(vi) la fiducie qui, avant ce moment et après le 17 décembre 1999, a effectué une distribution en faveur d’un bénéficiaire au titre de la participation de celui-ci à son capital, s’il est raisonnable de considérer que la distribution a été financée par une dette de la fiducie et si l’une des raisons pour lesquelles la dette a été contractée était d’éviter des impôts payables par ailleurs en vertu de la présente partie par suite du décès d’un particulier.

(9) The definition “montant de réduction admissible” in subsection 108(1) of the French version of the Act is replaced by the following:

« montant de réduction admissible »
“eligible offset”

« montant de réduction admissible » En ce qui concerne un contribuable à un moment donné relativement à la totalité ou à une partie de sa participation au capital d’une fiducie, toute partie de dette ou d’obligation qui est prise en charge par le contribuable et qu’il est raisonnable de considérer comme étant imputable à un bien distribué à ce moment en règlement de la participation ou de la partie de participation, si la distribution est conditionnelle à la prise en charge par le contribuable de la partie de dette ou d’obligation.

(10) Clauses 108(2)(b)(iv)(A) and (B) of the Act are replaced by the following:

(A) not less than 95% of its income for the current year (computed without regard to subsections 39(2), 49(2.1) and 104(6)) was derived from, or from the disposition of, investments described in subparagraph (iii), or

(B) not less than 95% of its income for each of the relevant periods (computed without regard to subsections 39(2), 49(2.1) and 104(6) and as though each of those periods were a taxation year) was derived from, or from the disposition of, investments described in subparagraph (iii),

(11) Subsections (2) and (3) apply to taxation years that end after December 20, 2002, except that

(a) a transfer that is required, by clause (d)(iii)(B) of the definition “testamentary trust” in subsection 108(1) of the Act, as enacted by subsection (3), to be made within 12 months after a payment was made is deemed to be made in a timely manner if it is made no later than 12 months after this Act receives royal assent; and

(b) for those taxation years that end before the day on which this Act receives royal assent, the reference to “within the first 12 months after the individual’s death” in clause (d)(iii)(C) of the definition “testamentary trust” in subsection 108(1) of the Act, as enacted by subsection (3), is to be read as a reference to “after the individ-ual’s death and no later than 12 months after the day on which the Technical Tax Amendments Act, 2012 receives royal assent”.

(12) Subsection (4) applies to trust taxation years that begin after 2006.

(13) Subsection (5) applies to the 1998 and subsequent taxation years.

(14) Subsection (6) applies to taxation years that begin after October 31, 2011.

(15) Subsection (10) applies to the 2003 and subsequent taxation years.

237. (1) Paragraph 110(1)(k) of the Act is replaced by the following:

Part VI.1 tax

(k) the amount determined by multiplying the taxpayer’s tax payable under subsection 191.1(1) for the year by

(i) if the taxation year ends before 2010, 3,

(ii) if the taxation year ends after 2009 and before 2012, 3.2, and

(iii) if the taxation year ends after 2011, 3.5.

(2) Subsection 110(1.7) of the Act is replaced by the following:

Reduction in exercise price

(1.7) If the amount payable by a taxpayer to acquire securities under an agreement referred to in subsection 7(1) is reduced at any particular time and the conditions in subsection (1.8) are satisfied in respect of the reduction,

(a) the rights (referred to in this subsection and subsection (1.8) as the “old rights”) that the taxpayer had under the agreement immediately before the particular time are deemed to have been disposed of by the taxpayer immediately before the particular time;

(b) the rights (referred to in this subsection and subsection (1.8) as the “new rights”) that the taxpayer has under the agreement at the particular time are deemed to be acquired by the taxpayer at the particular time; and

Conditions for subsection (1.7) to apply

(1.8) The following are the conditions in respect of the reduction:

(a) that the taxpayer would not be entitled to a deduction under paragraph (1)(d) if the taxpayer acquired securities under the agreement immediately after the particular time and this section were read without reference to subsection (1.7); and

(b) that the taxpayer would be entitled to a deduction under paragraph (1)(d) if the taxpayer

(i) disposed of the old rights immediately before the particular time,

(ii) acquired the new rights at the partic-ular time as consideration for the disposition, and

(iii) acquired securities under the agreement immediately after the particular time.

(3) Subsection (1) applies to the 2003 and subsequent taxation years.

(4) Subsection (2) applies to reductions that occur after 1998.

(5) An election by a taxpayer under subsection 7(10) of the Act, as it read immediately before its repeal by subsection 3(10) of the Sustaining Canada’s Economic Recovery Act, to have subsection 7(8) of the Act, as it read immediately before its repeal by subsection 3(8) of the Sustaining Canada’s Economic Recovery Act, apply is deemed to have been filed in a timely manner if

(a) it is filed on or before the 60th day after the day on which this Act receives royal assent;

(b) it is in respect of a security acquired by the taxpayer before the day on which this Act receives royal assent;

(d) the taxpayer would not have been so entitled if subsection 110(1.7) of the Act, as enacted by subsection (2), did not apply.

238. (1) The portion of paragraph 110.1(1)(a) of the Act before the formula is replaced by the following:

Charitable gifts

(i) a registered charity,

(ii) a registered Canadian amateur athletic association,

(iii) a corporation resident in Canada and described in paragraph 149(1)(i),

(iv) a municipality in Canada,

(iv.1) a municipal or public body performing the function of government in Canada,

(v) the United Nations or an agency thereof,

(vi) a university outside Canada that is prescribed to be a university the student body of which ordinarily includes students from Canada,

(vii) a charitable organization outside Canada to which Her Majesty in right of Canada has made a gift in the year or in the 12-month period preceding the year, or

(viii) Her Majesty in right of Canada or a province,

not exceeding the lesser of the corporation’s income for the year and the amount determined by the formula

(2) The portion of paragraph 110.1(1)(a) of the Act before the formula, as enacted by subsection (1), is replaced by the following:

Charitable gifts

(a) the total of all amounts each of which is the eligible amount of a gift (other than a gift described in paragraph (b), (c) or (d)) made by the corporation in the year or in any of the five preceding taxation years to a qualified donee, not exceeding the lesser of the corporation’s income for the year and the amount determined by the formula

(3) The description of B in paragraph 110.1(1)(a) of the Act is replaced by the following:

B is the total of all amounts, each of which is that proportion of the corporation’s taxable capital gain for the taxation year in respect of a gift made by the corporation in the taxation year (in respect of which gift an eligible amount is described in this paragraph for the taxation year) that the eligible amount of the gift is of the corporation’s proceeds of disposition in respect of the gift,

(4) Clause (B) in the description of D in paragraph 110.1(1)(a) of the Act is replaced by the following:

(B) the total of all amounts each of which is determined in respect of a disposition that is the making of a gift of property of the class by the corporation in the year (in respect of which gift an eligible amount is described in this paragraph for the taxation year) equal to the lesser of

(I) that proportion, of the amount by which the proceeds of disposition of the property exceeds any outlays and expenses, to the extent that they were made or incurred by the corporation for the purpose of making the disposition, that the eligible amount of the gift is of the corporation’s proceeds of disposition in respect of the gift, and

(II) that proportion, of the capital cost to the corporation of the property, that the eligible amount of the gift is of the corporation’s proceeds of disposition in respect of the gift;

(5) Paragraph 110.1(1)(a.1) of the Act is replaced by the following:

Gifts of medicine

(a.1) the total of all amounts each of which is an amount, in respect of property that is the subject of an eligible medical gift made by the corporation in the taxation year or in any of the five preceding taxation years, determined by the formula

A × B/C

where

A is the lesser of

(a) the cost to the corporation of the property, and

(b) 50 per cent of the amount, if any, by which the corporation’s proceeds of disposition of the property in respect of the gift exceeds the cost to the corporation of the property;

B is the eligible amount of the gift; and

C is the corporation’s proceeds of disposition of the property in respect of the gift.

(6) The portion of paragraph 110.1(1)(b) of the Act before subparagraph (i) is replaced by the following:

Gifts to Her Majesty

(b) the total of all amounts each of which is the eligible amount of a gift (other than a gift described in paragraph (c) or (d)) made by the corporation to Her Majesty in right of Canada or of a province

(7) Paragraph 110.1(1)(c) of the Act is replaced by the following:

Gifts to institutions

(c) the total of all amounts each of which is the eligible amount of a gift (other than a gift described in paragraph (d)) of an object that the Canadian Cultural Property Export Review Board has determined meets the criteria set out in paragraphs 29(3)(b) and (c) of the Cultural Property Export and Import Act, which gift was made by the corporation in the year or in any of the five preceding taxation years to an institution or a public authority in Canada that was, at the time the gift was made, designated under subsection 32(2) of that Act either generally or for a specified purpose related to that object; and

(8) Subparagraph 110.1(1)(d)(i) of the Act is replaced by the following:

(i) Her Majesty in right of Canada or of a province, a municipality in Canada or a municipal or public body performing a function of government in Canada, or

(9) Paragraph 110.1(1)(d) of the Act, as amended by subsection (8), is replaced by the following:

Ecological gifts

(d) the total of all amounts each of which is the eligible amount of a gift of land (including a covenant or an easement to which land is subject or, in the case of land in the Province of Quebec, a real servitude) if

(i) the fair market value of the gift is certified by the Minister of the Environment,

(ii) the land is certified by that Minister, or by a person designated by that Minister, to be ecologically sensitive land, the conservation and protection of which is, in the opinion of that Minister or the designated person, important to the preservation of Canada’s environmental heritage, and

(iii) the gift was made by the corporation in the year or in any of the five preceding taxation years to

(A) Her Majesty in right of Canada or of a province,

(B) a municipality in Canada,

(D) a registered charity one of the main purposes of which is, in the opinion of that Minister, the conservation and protection of Canada’s environmental heritage, and that is approved by that Minister or the designated person in respect of the gift.

(10) The portion of subsection 110.1(2) of the Act before paragraph (a) is replaced by the following:

Proof of gift

(2) An eligible amount of a gift shall not be included for the purpose of determining a deduction under subsection (1) unless the making of the gift is evidenced by filing with the Minister

(11) Subsection 110.1(3) of the Act is replaced by the following:

Where subsection (3) applies

(2.1) Subsection (3) applies in circumstances where

(a) a corporation makes a gift at any time of

(i) capital property to a donee described in paragraph (1)(a), (b) or (d), or

(ii) in the case of a corporation not resident in Canada, real or immovable property situated in Canada to a prescribed donee who provides an undertaking, in a form satisfactory to the Minister, to the effect that the property will be held for use in the public interest; and

(b) the fair market value of the property otherwise determined at that time exceeds

(i) in the case of depreciable property of a prescribed class, the lesser of the undepreciated capital cost of that class at the end of the taxation year of the corporation that includes that time (determined without reference to the proceeds of disposition designated in respect of the property under subsection (3)) and the adjusted cost base to the corporation of the property immediately before that time, and

(ii) in any other case, the adjusted cost base to the corporation of the property immediately before that time.

Gifts of capital property

(3) If this subsection applies in respect of a gift by a corporation of property, and the corporation designates an amount in respect of the gift in its return of income under section 150 for the year in which the gift is made, the amount so designated is deemed to be its proceeds of disposition of the property and, for the purpose of subsection 248(31), the fair market value of the gift, but the amount so designated may not exceed the fair market value of the property otherwise determined and may not be less than the greater of

(a) in the case of a gift made after December 20, 2002, the amount of the advantage, if any, in respect of the gift, and

(b) the amount determined under subparagraph (2.1)(b)(i) or (ii), as the case may be, in respect of the property.

(12) Subparagraph 110.1(2.1)(a)(i) of the Act, as enacted by subsection (11), is replaced by the following:

(i) capital property to a qualified donee, or

(13) Subsection 110.1(4) of the Act is replaced by the following:

Gifts made by partnership

(4) If at the end of a fiscal period of a partnership a corporation is a member of the partnership, its share of any amount that would, if the partnership were a person, be the eligible amount of a gift made by the partnership to any donee is, for the purpose of this section, deemed to be the eligible amount of a gift made to that donee by the corporation in its taxation year in which the fiscal period of the partnership ends.

(14) The portion of paragraph 110.1(5)(b) of the Act before subparagraph (i) is replaced by the following:

(b) where the gift is a covenant or an easement to which land is subject or, in the case of land in the Province of Quebec, a real servitude, the greater of

(15) Subsections (1), (3), (4), (6), (7), (9), (10), (13) and (14) apply to gifts made after December 20, 2002.

(16) Subsections (2) and (12) are deemed to have come into force on January 1, 2012.

(17) Subsection (5) applies to gifts made after March 18, 2007.

(18) Subsection (8) applies to gifts made after May 8, 2000.

(19) Subsection (11) applies to gifts made after 1999, except that, for gifts made after 1999 and before December 21, 2002, the reference to “subsection 248(31)” in subsection 110.1(3) of the Act, as enacted by subsection (11), is to be read as a reference to “subsection (1)”.

239. (1) Paragraph (c) of the definition “qualifying amount” in subsection 110.2(1) of the Act is replaced by the following:

(2) Subsection (1) is deemed to have come into force on April 1, 2006.

240. (1) The portion of paragraph (a) of the definition “qualified farm property” in subsection 110.6(1) of the Act before subparagraph (i) is replaced by the following:

(a) real or immovable property that was used in the course of carrying on the business of farming in Canada by,

(2) The portion of paragraph (a) of the definition “qualified fishing property” in subsection 110.6(1) of the Act before subparagraph (i) is replaced by the following:

(a) real or immovable property or a fishing vessel that was used in the course of carrying on the business of fishing in Canada by,

(3) Paragraphs 110.6(1.3)(a) and (b) of the Act are replaced by the following:

(a) the following apply in respect of the property or property for which the property was substituted (in this paragraph referred to as “the property”),

(i) the property was owned throughout the period of at least 24 months immediately preceding that time by one or more of

(A) the individual, or a spouse, common-law partner, child or parent of the individual,

(B) a partnership, an interest in which is an interest in a family farm partnership of the individual or of the individual’s spouse or common-law partner,

(C) if the individual is a personal trust, the individual from whom the trust acquired the property or a spouse, common-law partner, child or parent of that individual, or

(D) a personal trust from which the individual or a child or parent of the individual acquired the property, and

(ii) either

(A) in at least two years while the property was owned by one or more persons referred to in subparagraph (i),

(I) the gross revenue of a person (in this subclause referred to as the “operator”) referred to in subparagraph (i) from the farming business referred to in subclause (II) for the period during which the property was owned by a person described in subparagraph (i) exceeded the income of the operator from all other sources for that period, and

(II) the property was used principally in a farming business carried on in Canada in which an individual referred to in subparagraph (i), or where the individual is a personal trust, a beneficiary of the trust, was actively engaged on a regular and continuous basis, or

(B) throughout a period of at least 24 months while the property was owned by one or more persons or partnerships referred to in subparagraph (i), the property was used by a corporation referred to in subparagraph (a)(iv) of the definition “qualified farm property” in subsection (1) or by a partnership referred to in subparagraph (a)(v) of that definition in a farming business in which an individual referred to in any of subparagraphs (a)(i) to (iii) of that definition was actively engaged on a regular and continuous basis; or

(4) The portion of subsection 110.6(6) of the Act before paragraph (a) is replaced by the following:

Failure to report capital gain

(6) Notwithstanding subsections (2) to (2.3), no amount may be deducted under this section in respect of a capital gain of an individual for a particular taxation year in computing the individual’s taxable income for the particular taxation year or any subsequent year, if

(5) Paragraph 110.6(6)(a) of the French version of the Act is replaced by the following:

a) le particulier, sciemment ou dans des circonstances équivalant à faute lourde :

(i) soit ne produit pas de déclaration de revenu pour l’année donnée dans un délai de un an suivant la date d’échéance de production qui lui est applicable pour cette année,

(ii) soit ne déclare pas le gain en capital dans sa déclaration de revenu pour l’année donnée;

(6) The portion of subsection 110.6(12) of the Act before paragraph (a) is replaced by the following:

Trust deduction — death of spouse or common-law partner

(12) Notwithstanding any other provision of this Act, a trust (other than an alter ego trust or a joint spousal or common-law partner trust) that is described in paragraph 104(4)(a) or (a.1) may, in computing its taxable income for its taxation year that includes the day determined under paragraph 104(4)(a) or (a.1), as the case may be, in respect of the trust, deduct under this section an amount equal to the least of

(7) Subsection 110.6(14) of the Act is amended by adding the following after paragraph (d):

(d.1) a person who is a member of a partnership that is a member of another partnership is deemed to be a member of the other partnership;

(8) Subsections (1) and (2) apply to dispositions of property that occur after May 1, 2006.

(9) Subsection (3) applies to dispositions of property that occur after November 5, 2010.

(10) Subsections (4) and (5) apply to any taxation year for which a return of income has not been filed before October 31, 2011, except in respect of gains realized in another taxation year for which a return of income was filed before October 31, 2011.

(11) Subsection (6) applies to taxation years that begin after October 31, 2011.

(12) Subsection (7) applies

(a) to dispositions that occur after December 20, 2002; and

(b) to dispositions made by a taxpayer after 1999, if the taxpayer so elects in writing and files the election with the Minister of National Revenue on or before the taxpayer’s filing-due date for the taxpayer’s taxation year in which this Act receives royal assent.

241. (1) Subsection 111(1.1) of the Act is amended by striking out “and” at the end of paragraph (a), by adding “and” at the end of paragraph (b) and by adding the following after paragraph (b):

(c) the amount, if any, that the Minister determines to be reasonable in the circumstances, after considering the application of subsections 104(21.6), 130.1(4), 131(1) and 138.1(3.2) to the taxpayer for the particular year.

(2) Paragraph 111(1.1)(c) of the Act, as enacted by subsection (1), is replaced by the following:

(c) the amount, if any, that the Minister determines to be reasonable in the circumstances for the particular year and after considering the application to the taxpayer of subsections 104(21.6), 130.1(4), 131(1) and 138.1(3.2) as they read in their application to the taxpayer’s last taxation year that began before November 2011.

(3) Subsections 111(7.1) to (7.2) of the Act are repealed.

(4) The description of C in the definition “pre-1986 capital loss balance” in subsection 111(8) of the Act is replaced by the following:

C is the total of all amounts deducted under section 110.6 in computing the individual’s taxable income for taxation years that ended before 1988 or begin after October 17, 2000,

(5) Subsections (1) and (4) apply to the 2000 and subsequent taxation years.

(6) Subsections (2) and (3) apply to taxation years that begin after October 31, 2011.

242. (1) Subsection 112(2.1) of the Act is replaced by the following:

No deduction permitted

(2.1) No deduction may be made under subsection (1) or (2) in computing the taxable income of a specified financial institution in respect of a dividend received by it on a share that was, at the time the dividend was received, a term preferred share, other than a dividend on a share of the capital stock of a corporation that was not acquired in the ordinary course of the business carried on by the institution, and for the purposes of this subsection, if a restricted financial institution received the dividend on a share of the capital stock of a mutual fund corporation or an investment corporation at any time after the mutual fund or investment corporation has elected under subsection 131(10) not to be a restricted financial institution, the share is deemed to be a term preferred share acquired in the ordinary course of business.

(2) The portion of paragraph 112(2.2)(a) of the Act before subparagraph (i) is replaced by the following:

(a) a person or partnership (in this subsection and subsection (2.21) referred to as the “guarantor”) that is a specified financial institution or a specified person in relation to a specified financial institution, but that is not the issuer of the share or an individual other than a trust, is, at or immediately before the time the dividend was received, obligated, either absolutely or contingently and either immediately or in the future, to effect any undertaking (in this subsection and subsections (2.21) and (2.22) referred to as a “guarantee agreement”), including any guarantee, covenant or agreement to purchase or repurchase the share and including the lending of funds to or the placing of amounts on deposit with, or on behalf of, the particular corporation or any specified person in relation to the particular corporation given to ensure that

(3) Subsections (1) and (2) apply to dividends received on or after November 5, 2010.

243. (1) Clause 113(1)(b)(i)(A) of the Act is replaced by the following:

(A) the corporation’s relevant tax factor for the year

(2) Clause 113(1)(c)(i)(B) of the Act is replaced by the following:

(B) the corporation’s relevant tax factor for the year, and

(3) Subsections (1) and (2) are deemed to have come into force on January 1, 2001.

244. (1) The portion of subsection 115.2(2) of the Act before paragraph (a) is replaced by the following:

Not carrying on business in Canada

(2) For the purposes of subsections 115(1) and 150(1) and Part XIV, a non-resident person is not considered to be carrying on business in Canada at any particular time solely because of the provision to the person, or to a partnership of which the person is a member, at the particular time of designated investment serv-ices by a Canadian service provider if

(2) Paragraph 115.2(2)(c) of the Act is amended by striking out “or” at the end of subparagraph (i) and by replacing subparagraph (ii) with the following:

(ii) where the non-resident person is, or is affiliated with, a person or partnership described in clause (A) or (B), the total of the fair market value of all investments in the partnership at the particular time is not less than four times the total of the fair market value of each investment in the partnership beneficially owned at the particular time by

(A) a person or partnership (other than a designated entity in respect of the Canadian service provider), more than 25% of the total of the fair market value, at the particular time, of investments in which are beneficially owned by persons and partnerships (other than a designated entity in respect of the Canadian service provider) that are affiliated with the Canadian service provider, or

(B) a person or partnership (other than a designated entity in respect of the Canadian service provider) that is affiliated with the Canadian service provider, or

(iii) at the particular time, the non-resident person is not affiliated with the Canadian service provider and is not affiliated with any person or partnership (other than the partnership to which the services are provided) described in clause (ii)(A) or (B).

(3) The portion of subsection 115.2(3) of the Act before paragraph (a) is replaced by the following:

Interpretation

(3) For the purposes of this subsection and subparagraphs (2)(b)(iii) and (c)(ii),

(4) Section 115.2 of the Act is amended by adding the following after subsection (4):

Property of a partnership

(5) For the purpose of determining whether a non-resident person’s interest in a partnership is, at any particular time before March 5, 2010, a taxable Canadian property, property of the partnership shall not be considered to be used or held by the partnership in a business carried on in Canada, if because of subsection (2) the non-resident person is not considered to be carrying on business in Canada at the particular time.

(5) Subsection 115.2(5) of the Act, as enacted by subsection (4), is repealed.

(6) Subsection (1) applies to the 1999 and subsequent taxation years.

(7) Subsections (2) and (3) apply to the 2002 and subsequent taxation years, except that for the period that begins at the beginning of the 2002 taxation year of a taxpayer and that ends on October 31, 2011, paragraph 115.2(2)(c) of the Act, as amended by subsection (2), does not apply to the taxpayer if the taxpayer so elects and files the election in writing with the Minister of National Revenue on or before the taxpayer’s filing-due date for the taxpayer’s taxation year that includes October 31, 2011.

(8) Subsection (4) applies to the 2008 and subsequent taxation years.

(9) Subsection (5) is deemed to have come into force on March 5, 2010.

245. (1) The portion of subsection 116(5.2) of the Act before paragraph (a) is replaced by the following:

Certificates for dispositions

(5.2) If a non-resident person has, in respect of a disposition, or a proposed disposition, in a taxation year to a taxpayer of property (other than excluded property) that is a life insurance policy in Canada, a Canadian resource property, a property (other than capital property) that is real property, or an immovable, situated in Canada, a timber resource property, depreciable property that is a taxable Canadian property, eligible capital property that is a taxable Canadian property or any interest in, or for civil law any right in, or any option in respect of, a property to which this subsection applies (whether or not that property exists),

(2) Paragraph 116(6)(f) of the Act is replaced by the following:

(f) property of an authorized foreign bank that carries on a Canadian banking business;

(3) Subsection (1) is deemed to have come into force on December 24, 1998.

(4) Subsection (2) is deemed to have come into force on June 28, 1999.

246. (1) Paragraph (a) of the definition “pension income” in subsection 118(7) of the Act is amended by adding the following after subparagraph (iii):

(iii.1) a payment (other than a payment described in subparagraph (i)) payable on a periodic basis under a money purchase provision (within the meaning assigned by subsection 147.1(1)) of a registered pension plan,

(2) Subsection (1) applies to the 2004 and subsequent taxation years.

247. (1) The definition “qualified Canadian transit organization” in subsection 118.02(1) of the Act is replaced by the following:

“qualified Canadian transit organization”
« organisme de transport canadien admissible »

“qualified Canadian transit organization” means a person authorised, under a law of Canada or a province, to carry on in Canada a business that is the provision of public commuter transit services, which is carried on through a permanent establishment (as defined by regulation) in Canada.

(2) Subsection (1) applies to the 2009 and subsequent taxation years.

248. (1) The definition “total charitable gifts” in subsection 118.1(1) of the Act is replaced by the following:

“total charitable gifts”
« total des dons de bienfaisance »

“total charitable gifts”, of an individual for a taxation year, means the total of all amounts each of which is the eligible amount of a gift (other than a gift described in the definition “total Crown gifts”, “total cultural gifts” or “total ecological gifts”) made by the individual in the year or in any of the five preceding taxation years (other than in a year for which a deduction under subsection 110(2) was claimed in computing the individual’s taxable income) to

(a) a registered charity,

(b) a registered Canadian amateur athletic association,

(d) a municipality in Canada,

(d.1) a municipal or public body performing a function of government in Canada,

(e) the United Nations or an agency thereof,

(f) a university outside Canada that is prescribed to be a university the student body of which ordinarily includes students from Canada,

(g) a charitable organization outside Canada to which her Majesty in right of Canada has made a gift during the individual’s taxation year or the 12 months immediately preceding that taxation year, or

(g.1) Her Majesty in right of Canada or a province,

to the extent that those amounts were

(h) not deducted in computing the individ-ual’s taxable income for a taxation year ending before 1988, and

(i) not included in determining an amount that was deducted under this section in computing the individual’s tax payable under this Part for a preceding taxation year;

(2) The definition “total charitable gifts” in subsection 118.1(1) of the Act, as enacted by subsection (1), is replaced by the following:

“total charitable gifts”
« total des dons de bienfaisance »

“total charitable gifts”, of an individual for a taxation year, means the total of all amounts each of which is the eligible amount of a gift (other than a gift the eligible amount of which is included in the total Crown gifts, the total cultural gifts or the total ecological gifts of the individual for the year) made by the individual in the year or in any of the five preceding taxation years (other than in a year for which a deduction under subsection 110(2) was claimed in computing the individual’s taxable income) to a qualified donee, to the extent that the amount was not included in determining an amount that was deducted under this section in computing the individual’s tax payable under this Part for a preceding taxation year;

(3) Paragraph (a) of the definition “total ecological gifts” in subsection 118.1(1) of the Act is replaced by the following:

(a) Her Majesty in right of Canada or of a province, a municipality in Canada or a municipal or public body performing a function of government in Canada, or

(4) The definition “total ecological gifts” in subsection 118.1(1) of the Act, as amended by subsection (3), is replaced by the following:

“total ecological gifts”
« total des dons de biens écosensibles »

“total ecological gifts”, of an individual for a taxation year, means the total of all amounts each of which is the eligible amount of a gift (other than a gift described in the definition “total cultural gifts”) of land (including a covenant or an easement to which land is subject or, in the case of land in the Province of Quebec, a real servitude) if

(a) the fair market value of the gift is certified by the Minister of the Environment,

(b) the land is certified by that Minister, or by a person designated by that Minister, to be ecologically sensitive land, the conservation and protection of which is, in the opinion of that Minister or the designated person, important to the preservation of Canada’s environmental heritage, and

(i) Her Majesty in right of Canada or of a province,

(ii) a municipality in Canada,

(iii) a municipal or public body performing a function of government in Canada, or

(iv) a registered charity one of the main purposes of which is, in the opinion of that Minister, the conservation and protection of Canada’s environmental heritage, and that is approved by that Minister or the designated person in respect of the gift,

to the extent that those amounts were not included in determining an amount that was deducted under this section in computing the individual’s tax payable under this Part for a preceding taxation year;

(5) The portion of the definition “total Crown gifts” in subsection 118.1(1) of the Act before paragraph (a) is replaced by the following:

“total Crown gifts”
« total des dons à l’État »

“total Crown gifts”, of an individual for a taxation year, means the total of all amounts each of which is the eligible amount of a gift (other than a gift described in the definition “total cultural gifts” or “total ecological gifts”) made by the individual in the year or in any of the five preceding taxation years to Her Majesty in right of Canada or of a province, to the extent that those amounts were

(6) The portion of the definition “total cultural gifts” in subsection 118.1(1) of the Act before paragraph (a) is replaced by the following:

“total cultural gifts”
« total des dons de biens culturels »

“total cultural gifts”, of an individual for a taxation year, means the total of all amounts each of which is the eligible amount of a gift

(7) The description of B in subparagraph (a)(iii) of the definition “total gifts” in subsection 118.1(1) of the Act is replaced by the following:

B is the total of all amounts, each of which is that proportion of the individ- ual’s taxable capital gain for the taxation year in respect of a gift made by the individual in the taxation year (in respect of which gift an eligible amount is included in the individual’s total charitable gifts for the taxation year) that the eligible amount of the gift is of the individual’s proceeds of disposition in respect of the gift,

(8) Clause (B) in the description of D in subparagraph (a)(iii) of the definition “total gifts” in subsection 118.1(1) of the Act is replaced by the following:

(B) the total of all amounts each of which is determined in respect of a disposition that is the making of a gift of property of the class made by the individual in the year (in respect of which gift an eligible amount is included in the individual’s total charitable gifts for the taxation year) equal to the lesser of

(I) that proportion, of the amount by which the proceeds of disposition of the property exceed any outlays and expenses, to the extent that they were made or incurred by the individual for the purpose of making the disposition, that the eligible amount of the gift is of the individual’s proceeds of disposition in respect of the gift, and

(II) that proportion, of the capital cost to the individual of the property, that the eligible amount of the gift is of the individual’s proceeds of disposition in respect of the gift, and

(9) The portion of subsection 118.1(2) of the Act before paragraph (a) is replaced by the following:

Proof of gift

(2) An eligible amount of a gift shall not be included in the total charitable gifts, total Crown gifts, total cultural gifts or total ecological gifts of an individual unless the making of the gift is evidenced by filing with the Minister

(10) Subsection 118.1(6) of the Act is replaced by the following:

Where subsection (6) applies

(5.4) Subsection (6) applies in circumstances where

(a) an individual

(i) makes a gift (by the individual’s will or otherwise) at any time of capital property to a donee described in the definition “total charitable gifts”, “total Crown gifts” or “total ecological gifts” in subsection (1), or

(ii) who is non-resident, makes a gift (by the individual’s will or otherwise) at any time of real or immovable property situated in Canada to a prescribed donee who provides an undertaking, in a form satisfactory to the Minister, to the effect that the property will be held for use in the public interest; and

(b) the fair market value of the property otherwise determined at that time exceeds

(i) in the case of depreciable property of a prescribed class, the lesser of the undepreciated capital cost of that class at the end of the taxation year of the individual that includes that time (determined without reference to proceeds of disposition designated in respect of the property under subsection (6)) and the adjusted cost base to the individual of the property immediately before that time, and

(ii) in any other case, the adjusted cost base to the individual of the property immediately before that time.

Gifts of capital property

(6) If this subsection applies in respect of a gift by an individual of property, and the individual or the individual’s legal representative designates an amount in respect of the gift in the individual’s return of income under section 150 for the year in which the gift is made, the amount so designated is deemed to be the individual’s proceeds of disposition of the property and, for the purpose of subsection 248(31), the fair market value of the gift, but the amount so designated may not exceed the fair market value of the property otherwise determined and may not be less than the greater of

(a) in the case of a gift made after December 20, 2002, the amount of the advantage, if any, in respect of the gift, and

(b) the amount determined under subparagraph (5.4)(b)(i) or (ii), as the case may be, in respect of the property.

(11) Subparagraph 118.1(5.4)(a)(i) of the Act, as enacted by subsection (10), is replaced by the following:

(i) makes a gift (by the individual’s will or otherwise) at any time of capital property to a qualified donee, or

(12) Paragraph 118.1(7)(b) of the French version of the Act is replaced by the following:

b) le montant indiqué par le particulier ou par son représentant légal dans la déclaration de revenu du particulier produite conformément à l’article 150 pour l’année du don est réputé correspondre à la fois au produit de disposition de l’oeuvre d’art pour le particulier et, pour l’application du paragraphe 248(31), à la juste valeur marchande de l’oeuvre d’art; toutefois, il ne peut ni excéder la juste valeur marchande de l’oeuvre d’art, déterminée par ailleurs, ni être inférieur au plus élevé des montants suivants :

(i) le montant de l’avantage au titre du don,

(ii) le coût indiqué de l’oeuvre d’art pour le particulier.

(13) Paragraph 118.1(7)(d) of the English version of the Act is replaced by the following:

(d) the amount that the individual or the individual’s legal representative designates in the individual’s return of income under section 150 for the year in which the gift is made is deemed to be the individual’s proceeds of disposition of the work of art and, for the purpose of subsection 248(31), the fair market value of the work of art, but the amount so designated may not exceed the fair market value otherwise determined of the work of art and may not be less than the greater of

(i) the amount of the advantage, if any, in respect of the gift, and

(ii) the cost amount to the individual of the work of art.

(14) Paragraph 118.1(7.1)(b) of the French version of the Act is replaced by the following:

b) le particulier est réputé avoir reçu, au moment donné pour l’oeuvre d’art, un produit de disposition égal au coût indiqué de l’oeuvre d’art pour lui à ce moment ou, s’il est plus élevé, au montant de l’avantage au titre du don.

(15) Paragraph 118.1(7.1)(d) of the English version of the Act is replaced by the following:

(d) the individual is deemed to have received at the particular time proceeds of disposition in respect of the work of art equal to the greater of its cost amount to the individual at that time and the amount of the advantage, if any, in respect of the gift.

(16) Subsection 118.1(8) of the Act is replaced by the following:

Gifts made by partnership

(8) If at the end of a fiscal period of a partnership an individual is a member of the partnership, the individual’s share of any amount that would, if the partnership were a person, be the eligible amount of a gift made by the partnership to any donee is, for the purpose of this section, deemed to be the eligible amount of a gift made to that donee by the individual in the individual’s taxation year in which the fiscal period of the partnership ends.

(17) Paragraphs 118.1(13)(b) and (c) of the Act are replaced by the following:

(b) if the security ceases to be a non-qualifying security of the individual at a subsequent time that is within 60 months after the particular time and the donee has not disposed of the security at or before the subsequent time, the individual is deemed to have made a gift to the donee of property at the subsequent time and the fair market value of that property is deemed to be the lesser of the fair market value of the security at the subsequent time and the fair market value of the security at the particular time that would, if this Act were read without reference to this subsection, have been included in calculating the individual’s total charitable gifts or total Crown gifts for a taxation year;

(c) if the security is disposed of by the donee within 60 months after the particular time and paragraph (b) does not apply to the security, the individual is deemed to have made a gift to the donee of property at the time of the disposition and the fair market value of that property is deemed to be the lesser of the fair market value of any consideration (other than a non-qualifying security of the individual or a property that would be a non-qualifying security of the individual if the individual were alive at that time) received by the donee for the disposition and the fair market value of the security at the particular time that would, if this Act were read without reference to this subsection, have been included in calculating the individual’s total charitable gifts or total Crown gifts for a taxation year; and

(18) Paragraph 118.1(13)(c) of the Act, as enacted by subsection (17), is replaced by the following:

(c) if the security is disposed of by the donee within 60 months after the particular time and paragraph (b) does not apply to the security, the individual is deemed to have made a gift to the donee of property at the time of the disposition and the fair market value of that property is deemed to be the lesser of the fair market value of any consideration (other than a non-qualifying security of any person) received by the donee for the disposition and the fair market value of the security at the particular time that would, if this Act were read without reference to this subsection, have been included in calculating the individual’s total charitable gifts or total Crown gifts for a taxation year; and

(19) Subsections (1), (4), (5) to (9) and (12) to (17) apply to gifts made after December 20, 2002.

(20) Subsections (2) and (11) are deemed to have come into force on January 1, 2012.

(21) Subsection (3) applies to gifts made after May 8, 2000.

(22) Subsection (10) applies to gifts made after 1999, except that, for gifts made before December 21, 2002, the reference to “subsection 248(31)” in subsection 118.1(6) of the Act, as enacted by subsection (10), is to be read as a reference to “subsection (1)”.

(23) Subsection (18) is deemed to have come into force on March 22, 2011.

249. (1) The portion of the description of B in subsection 118.2(1) of the English version of the Act before paragraph (a) is replaced by the following:

B is the total of the individual’s medical expenses in respect of the individual, the individual’s spouse or common-law partner or a child of the individual who has not attained the age of 18 years before the end of the taxation year

(2) Subparagraph 118.2(2)(c)(i) of the Act is replaced by the following:

(i) the patient is, and has been certified in writing by a medical practitioner to be, a person who, by reason of mental or physical infirmity, is and is likely to be for a long-continued period of indefinite duration dependent on others for the patient’s personal needs and care and who, as a result, requires a full-time attendant,

(3) Paragraphs 118.2(2)(d) and (e) of the Act are replaced by the following:

(d) for the full-time care in a nursing home of the patient, who has been certified in writing by a medical practitioner to be a person who, by reason of lack of normal mental capacity, is and in the foreseeable future will continue to be dependent on others for the patient’s personal needs and care;

(e) for the care, or the care and training, at a school, an institution or another place of the patient, who has been certified in writing by an appropriately qualified person to be a person who, by reason of a physical or mental handicap, requires the equipment, facilities or personnel specially provided by that school, institution or other place for the care, or the care and training, of individuals suffering from the handicap suffered by the patient;

(4) Subparagraph 118.2(2)(g)(ii) of the Act is replaced by the following:

(ii) one individual who accompanied the patient, where the patient was, and has been certified in writing by a medical practitioner to be, incapable of travelling without the assistance of an attendant

(5) Paragraph 118.2(2)(h) of the Act is replaced by the following:

(h) for reasonable travel expenses (other than expenses described in paragraph (g)) incurred in respect of the patient and, where the patient was, and has been certified in writing by a medical practitioner to be, incapable of travelling without the assistance of an attendant, in respect of one individual who accompanied the patient, to obtain medical services in a place that is not less than 80 km from the locality where the patient dwells if the circumstances described in subparagraphs (g)(iii) to (v) apply;

(6) Paragraph 118.2(2)(i) of the Act is replaced by the following:

(i) for, or in respect of, an artificial limb, an iron lung, a rocking bed for poliomyelitis victims, a wheel chair, crutches, a spinal brace, a brace for a limb, an ileostomy or colostomy pad, a truss for hernia, an artificial eye, a laryngeal speaking aid, an aid to hearing, an artificial kidney machine, phototherapy equipment for the treatment of psoriasis or other skin disorders, or an oxygen concentrator, for the patient;

(7) The portion of paragraph 118.2(2)(l.1) of the French version of the Act before subparagraph (i) is replaced by the following:

l.1) au nom du particulier, de son époux ou conjoint de fait ou d’une personne à charge visée à l’alinéa a), qui doit subir une transplantation de la moelle osseuse ou d’un organe :

(8) Subparagraph 118.2(2)(l.9)(iii) of the English version of the Act is replaced by the following:

(iii) at the time the remuneration is paid, the payee is neither the individual’s spouse or common-law partner nor under 18 years of age, and

(9) Subsections (1) and (8) apply to taxation years that end after October 31, 2011.

(10) Subsections (2) to (5) apply to certifications made after December 20, 2002.

250. (1) Paragraph 118.3(2)(a) of the French version of the Act is replaced by the following:

a) d’une part, le particulier demande pour l’année, pour cette personne, une déduction prévue au paragraphe 118(1), soit par application de l’alinéa 118(1)b), soit, si la personne est le père, la mère, le grand-père, la grand-mère, un enfant, un petit-enfant, le frère, la soeur, la tante, l’oncle, le neveu ou la nièce du particulier ou de son époux ou conjoint de fait, par application des alinéas 118(1)c.1) ou d), ou aurait pu demander une telle déduction pour l’année si cette personne n’avait eu aucun revenu pour l’année et avait atteint l’âge de 18 ans avant la fin de l’année et, dans le cas de la déduction prévue à l’alinéa 118(1)b), si le particulier n’avait pas été marié ou n’avait pas vécu en union de fait;

(2) Paragraph 118.3(4)(b) of the Act is replaced by the following:

(b) if the information referred to in paragraph (a) is provided by a person referred to in paragraph (1)(a.2) or (a.3), the information so provided is deemed to be included in a certificate in prescribed form.

(3) Subsection (1) applies to the 2001 and subsequent taxation years, except that, if a taxpayer and a person have jointly elected under section 144 of the Modernization of Benefits and Obligations Act, in respect of the 1998, 1999 or 2000 taxation years, subsection (1) applies to the taxpayer and the person in respect of the applicable taxation year and subsequent taxation years.

(4) Subsection (2) applies to the 2005 and subsequent taxation years.

251. Subparagraph 118.5(1)(a)(iii) of the Act is replaced by the following:

(iii) are paid on behalf of, or reimbursed to, the individual by the individual’s employer and the amount paid or reimbursed is not included in the individual’s income,

252. (1) Subparagraph (a)(i) of the definition “designated educational institution” in subsection 118.6(1) of the Act is replaced by the following:

(i) a university, college or other educational institution designated by the lieuten-ant governor in council of a province as a specified educational institution under the Canada Student Loans Act, designated by an appropriate authority under the Canada Student Financial Assistance Act, or des-ignated, for the purposes of An Act respecting financial assistance for education expenses, R.S.Q, c. A-13.3, by the Minister of the Province of Quebec responsible for the administration of that Act, or

(2) Subsection (1) applies to the 1998 and subsequent taxation years.

253. (1) Section 118.7 of the Act is replaced by the following:

Credit for EI and QPIP premiums and CPP contributions

118.7 For the purpose of computing the tax payable under this Part by an individual for a taxation year, there may be deducted the amount determined by the formula

A × B

where

A is the appropriate percentage for the year; and

B is the total of

(a) the total of all amounts each of which is an amount payable by the individual as an employee’s premium or a self-employment premium for the year under the Employment Insurance Act, not exceeding the maximum amount of such premiums payable by the individual for the year under that Act,

(a.1) the total of all amounts each of which is an amount payable by the individual as an employee’s premium for the year under the Act respecting parental insurance, R.S.Q., c. A-29.011, not exceeding the maximum amount of such premiums payable by the individual for the year under that Act,

(a.2) the amount, if any, by which the total of all amounts each of which is an amount payable by the individual in respect of self-employed earnings for the year as a premium under the Act respecting parental insurance, R.S.Q., c. A-29.011, (not exceeding the maximum amount of such premiums payable by the individual for the year under that Act) exceeds the amount deductible under paragraph 60(g) in computing the indi-vidual’s income for the year,

(b) the total of all amounts each of which is an amount payable by the individual for the year as an employee’s contribution under the Canada Pension Plan or under a provincial pension plan defined in section 3 of that Act, not exceeding the maximum amount of such contributions payable by the individual for the year under the plan, and

(i) the total of all amounts each of which is an amount payable by the individual in respect of self-employed earnings for the year as a contribution under the Canada Pension Plan or under a provincial pension plan within the meaning assigned by section 3 of that Act (not exceeding the maximum amount of such contributions payable by the individual for the year under the plan)

exceeds

(ii) the amount deductible under paragraph 60(e) in computing the individ-ual’s income for the year.

(2) Subsection (1) applies to the 2006 and subsequent taxation years, except that for taxation years ending after 2005 and before 2010, paragraph (a) of the description of B in section 118.7 of the Act, as enacted by subsection (1), is to be read as follows:

(a) the total of all amounts each of which is an amount payable by the individual as an employee’s premium for the year under the Employment Insurance Act, not exceeding the maximum amount of such premiums payable by the individual for the year under that Act,

254. (1) Paragraph 120.2(3)(b) of the Act is replaced by the following:

(b) the amount that, if this Act were read without reference to section 120, would be the individual’s tax payable under this Part for the year if the individual were not entitled to any deduction under any of sections 126, 127 and 127.4, and

(2) Subsection (1) applies to the 2000 and subsequent taxation years.

255. (1) The portion of paragraph 120.31(3)(b) of the Act before subparagraph (i) is replaced by the following:

(b) if the eligible taxation year ended before the taxation year preceding the year of receipt, an amount equal to the amount that would be calculated as interest payable on the amount, if any, by which the amount determined under paragraph (a) in respect of the eligible taxation year exceeds the taxpayer’s tax payable under this Part for that year, if the amount that would be calculated as interest payable on that excess were calculated

(2) Subsection (1) applies to the 1995 and subsequent taxation years.

256. (1) The portion of subparagraph (b)(ii) of the definition “split income” in subsection 120.4(1) of the English version of the Act before clause (A) is replaced by the following:

(ii) can reasonably be considered to be income derived from the provision of property or services by a partnership or trust to, or in support of, a business carried on by

(2) The portion of clause (c)(ii)(C) of the definition “split income” in subsection 120.4(1) of the English version of the Act before subclause (I) is replaced by the following:

(C) to be income derived from the provision of property or services by a partnership or trust to, or in support of, a business carried on by

(3) Subsections (1) and (2) apply in computing split income of a specified individual for taxation years that begin after December 20, 2002, other than in computing an amount included in that income that is from a trust or partnership for a taxation year or fiscal period of the trust or partnership that began before December 21, 2002.

257. (1) The portion of subsection 122(2) of the Act before paragraph (a) is replaced by the following:

Where subsection (1) does not apply

(2) Subsection (1) does not apply for a taxation year of an inter vivos trust that is not a mutual fund trust and that

(2) Subsection (1) applies to trust taxation years that begin after 2002.

258. (1) The portion of the definition “qualified REIT property” before paragraph (c) in subsection 122.1(1) of the Act is replaced by the following:

“qualified REIT property”
« bien admissible de FPI »

“qualified REIT property”, of a trust at any time, means a property that, at that time, is held by the trust and is

(a) a real or immovable property that is capital property, an eligible resale property, an indebtedness of a Canadian corporation represented by a bankers’ acceptance, a property described by paragraph (a) or (b) of the definition “qualified investment” in section 204 or a deposit with a credit union;

(b) a security of a subject entity all or substantially all of the gross REIT revenue of which, for its taxation year that ends in the trust’s taxation year that includes that time, is from maintaining, improving, leasing or managing real or immovable properties that are capital properties of the trust or of an entity of which the trust holds a share or an interest, including real or immovable properties that the trust, or an entity of which the trust holds a share or an interest, holds together with one or more other persons or partnerships;

(2) Paragraph (d) of the definition “qualified REIT property” in subsection 122.1(1) of the Act is replaced by the following:

(d) ancillary to the earning by the trust of amounts described in subparagraphs (b)(i) and (iii) of the definition “real estate investment trust”, other than

(i) an equity of an entity, or

(ii) a mortgage, hypothecary claim, mezzanine loan or similar obligation.

(3) Paragraph (a) of the definition “real estate investment trust” in subsection 122.1(1) of the Act is replaced by the following:

(a) at each time in the taxation year the total fair market value at that time of all non-portfolio properties that are qualified REIT properties held by the trust is at least 90% of the total fair market value at that time of all non-portfolio properties held by the trust;

(4) The portion of paragraph (b) of the definition “real estate investment trust” in subsection 122.1(1) of the Act before subparagraph (i) is replaced by the following:

(b) not less than 90% of the trust’s gross REIT revenue for the taxation year is from one or more of the following:

(5) Subparagraph (b)(iii) of the definition “real estate investment trust” in subsection 122.1(1) of the Act is replaced by the following:

(iii) dispositions of real or immovable properties that are capital properties,

(6) Paragraph (b) of the definition “real estate investment trust” in subsection 122.1(1) of the Act is amended by striking out “and” at the end of subparagraph (iv), by adding “and” at the end of subparagraph (v) and by adding the following after subparagraph (v):

(vi) dispositions of eligible resale properties;

(7) The portion of paragraph (c) of the definition “real estate investment trust” in subsection 122.1(1) of the Act before subparagraph (i) is replaced by the following:

(8) Subparagraph (c)(iii) of the definition “real estate investment trust” in subsection 122.1(1) of the Act is replaced by the following:

(iii) dispositions of real or immovable properties that are capital properties;

(9) The definition “real estate investment trust” in subsection 122.1(1) of the Act is amended by striking out “and” at the end of paragraph (c) and by replacing paragraph (d) with the following:

(d) at each time in the taxation year an amount, that is equal to 75% or more of the equity value of the trust at that time, is the amount that is the total fair market value of all properties held by the trust each of which is a real or immovable property that is capital property, an eligible resale property, an indebtedness of a Canadian corporation represented by a bankers’ acceptance, a property described by paragraph (a) or (b) of the definition “qualified investment” in section 204 or a deposit with a credit union; and

(e) investments in the trust are, at any time in the taxation year, listed or traded on a stock exchange or other public market.

(10) Paragraph (a) of the definition “rent from real or immovable properties” in subsection 122.1(1) of the Act is amended by adding “and” at the end of subparagraph (i), by replacing “and” at the end of subparagraph (ii) with “but” and by repealing subparagraph (iii).

(11) Subsection 122.1(1) of the Act is amended by adding the following in alphabetical order:

“eligible resale property”
« bien de revente admissible »

“eligible resale property”, of an entity, means real or immovable property (other than capital property) of the entity

(a) that is contiguous to a particular real or immovable property that is capital property or eligible resale property, held by

(i) the entity, or

(ii) another entity affiliated with the entity; and

(b) the holding of which is ancillary to the holding of the particular property.

“gross REIT revenue”
« revenu brut de FPI »

“gross REIT revenue”, of an entity for a taxation year, means the amount, if any, by which the total of all amounts received or receivable in the year (depending on the method regularly followed by the entity in computing the entity’s income) by the entity exceeds the total of all amounts each of which is the cost to the entity of a property disposed of in the year.

(12) Section 122.1 of the Act is amended by adding the following after subsection (1):

Application of subsection (1.2)

(1.1) Subsection (1.2) applies to an entity for a taxation year in respect of an amount and another entity (referred to in this subsection and subsection (1.2) as the “parent entity”, “specified amount” and “source entity”, respectively), if

(a) at any time in the taxation year the parent entity

(i) is affiliated with the source entity, or

(ii) holds securities of the source entity that

(A) are described by any of paragraphs (a) to (c) of the definition “equity” in subsection (1), and

(B) have a total fair market value that is greater than 10% of the equity value of the source entity;

(b) the specified amount is included in computing the parent entity’s gross REIT revenue for the taxation year in respect of a security of the source entity held by the parent entity; and

(c) in the case of a source entity that is a subject entity described in paragraph (b) of the definition “qualified REIT property” in subsection (1) in respect of the parent entity at each time during the taxation year at which the parent entity holds securities of the source entity, the specified amount cannot reasonably be considered to be derived from the source entity’s gross REIT revenue from maintaining, improving, leasing or managing real or immovable properties that are capital properties of the parent entity or of an entity of which the parent entity holds a share or an interest, including real or immovable properties that the parent entity, or an entity of which the parent entity holds a share or an interest, holds together with one or more other persons or partnerships.

Character preservation rule

(1.2) If this subsection applies to a parent entity for a taxation year in respect of a specified amount and a source entity, then for the purposes of the definition “real estate investment trust” in subsection (1), to the extent that the specified amount can reasonably be considered to be derived from gross REIT revenue of the source entity having a particular character, the specified amount is deemed to be gross REIT revenue of the parent entity having the same character and not having any other character.

Character of revenue — hedging arrangements

(1.3) For the purposes of the definition “real estate investment trust” in subsection (1),

(a) if an amount is included in gross REIT revenue of a trust for a taxation year and it results from an agreement that can reasonably be considered to have been made by the trust to reduce its risk from fluctuations in interest rates in respect of debt incurred by the trust to acquire or refinance real or immovable property, the amount is deemed to have the same character as gross REIT revenue in respect of the real or immovable property and not any other character; and

(b) if a real or immovable property is situated in a country other than Canada and an amount included in gross REIT revenue of a trust for a taxation year

(i) is a gain from fluctuations in the value of the currency of that country relative to Canadian currency recognized on

(A) revenue in respect of the real or immovable property, or

(B) debt incurred by the trust for the purpose of earning revenue in respect of the real or immovable property, or

(ii) results from an agreement that

(A) provides for the purchase, sale or exchange of currency, and

(B) can reasonably be considered to have been made by the trust to reduce its risk from currency fluctuations described in subparagraph (i),

the amount is deemed to have the same character as gross REIT revenue in respect of the real or immovable property and not any other character.

(13) Subsections (1) to (12) apply to

(a) taxation years of a trust that end after 2006 and before 2011 if

(i) investments in the trust are, in one or more of those taxation years, listed or traded on a stock exchange or other public market, and

(ii) the trust elects, by notifying the Minister of National Revenue in writing on or before its filing due-date for its taxation year that includes the day on which this Act receives royal assent, to have those subsections so apply; and

(b) the 2011 and subsequent taxation years, except that paragraph (d) of the definition “real estate investment trust” in subsection 122.1(1) of the Act, as enacted by subsection (9), is to be read as follows for taxation years that end before 2013:

(d) at each time in the taxation year an amount, that is equal to 75% or more of the equity value of the trust at that time, is the amount that is the total fair market value of all properties held by the trust each of which is real or immovable property, indebtedness of a Canadian corporation represented by a bankers’ acceptance, property described by either paragraph (a) or (b) of the definition “qualified investment” in section 204, or a deposit with a credit union; and

259. (1) The portion of subsection 122.3(1) of the Act before paragraph (a) is replaced by the following:

Overseas employment tax credit

122.3 (1) If an individual is resident in Canada in a taxation year and, throughout any period of more than six consecutive months that began before the end of the year and included any part of the year (in this section referred to as the “qualifying period”)

(2) Subsection 122.3(1.1) of the Act is replaced by the following:

Excluded income

(1.1) No amount may be included under paragraph (1)(d) in respect of an individual’s income for a taxation year from the individual’s employment by an employer

(a) if

(i) the employer carries on a business of providing services and does not employ in the business throughout the year more than five full-time employees,

(ii) the individual

(A) does not deal at arm’s length with the employer, or is a specified shareholder of the employer, or

(B) where the employer is a partnership, does not deal at arm’s length with a member of the partnership, or is a specified shareholder of a member of the partnership, and

(iii) but for the existence of the employer, the individual would reasonably be regarded as being an employee of a person or partnership that is not a specified employer; or

(b) if at any time in that portion of the qualifying period that is in the taxation year

(i) the employer provides the services of the individual to a corporation, partnership or trust with which the employer does not deal at arm’s length, and

(ii) the fair market value of all the issued shares of the capital stock of the corporation or of all interests in the partnership or trust, as the case may be, that are held, directly or indirectly, by persons who are resident in Canada is less than 10% of the fair market value of all those shares or interests.

(3) Subsections (1) and (2) apply to taxation years that begin after the day on which this Act receives royal assent.

260. Subsection 122.5(7) of the Act is replaced by the following:

Effect of bankruptcy

(7) For the purpose of this section, if in a taxation year an individual becomes bankrupt, the individual’s income for the taxation year shall include the individual’s income for the taxation year that begins on January 1 of the calendar year that includes the date of bankruptcy.

261. (1) Paragraph (a) of the definition “full rate taxable income” in subsection 123.4(1) of the Act is amended by striking out “and” at the end of subparagraph (ii) and by adding the following after subparagraph (ii):

(iii) the corporation’s income for the year from a personal services business; and

(2) The portion of paragraph (b) of the definition “full rate taxable income” in subsection 123.4(1) of the Act before subparagraph (i) is replaced by the following:

(b) if the corporation is a Canadian-controlled private corporation throughout the year, the amount by which that portion of the corporation’s taxable income for the year that is subject to tax under subsection 123(1) exceeds the total of

(3) Subparagraph (b)(iii) of the definition “full rate taxable income” in subsection 123.4(1) of the Act is replaced by the following:

(iii) except for a corporation that is, throughout the year, a cooperative corporation (within the meaning assigned by subsection 136(2)) or a credit union, the corporation’s aggregate investment income for the year, within the meaning assigned by subsection 129(4), and

(4) Subsection (1) applies to taxation years that begin after October 31, 2011.

(5) Subsection (2) applies to taxation years that end after October 31, 2011.

(6) Subsection (3) applies to the 2001 and subsequent taxation years.

262. (1) Subparagraphs 125(1)(b)(i) and (ii) of the Act are replaced by the following:

(i) 100/28 of the total of the amounts that would be deductible under subsection 126(1) from the tax for the year otherwise payable under this Part by it if those amounts were determined without reference to sections 123.3 and 123.4,

(ii) the amount determined by multiplying the total of the amounts that would be deductible under subsection 126(2) from the tax for the year otherwise payable under this Part by it, if those amounts were determined without reference to section 123.4, by the relevant factor for the year, and

(2) The description of B in subsection 125(5.1) of the Act is replaced by the following:

B is the amount determined by the formula

0.225% × (D – $10 million)

where

D is

(a) if, in both the particular taxation year and the preceding taxation year, the corporation is not associated with any corporation, the taxable capital employed in Canada (within the meaning assigned by subsection 181.2(1) or 181.3(1) or section 181.4, as the case may be) of the corporation for the preceding taxation year,

(b) if, in the particular taxation year, the corporation is not associated with any corporation but was associated with one or more corporations in the preceding taxation year, the taxable capital employed in Canada (within the meaning assigned by subsection 181.2(1) or 181.3(1) or section 181.4, as the case may be) of the corporation for the particular taxation year, or

(c) if, in the particular taxation year, the corporation is associated with one or more particular corporations, the total of all amounts each of which is the taxable capital employed in Canada (within the meaning assigned by subsection 181.2(1) or 181.3(1) or section 181.4, as the case may be) of the corporation or of any of the particular corporations for its last taxation year that ended in the preceding calendar year.

(3) Subparagraph 125(1)(b)(i) of the Act, as enacted by subsection (1), applies to taxation years that end after October 31, 2011, except that, for a taxation year that includes that day, that subparagraph, as enacted by subsection (1), is to be read as follows:

(i) the total of

(A) 10/3 of the total of the amounts that would be deductible under subsection 126(1) from the tax for the year otherwise payable under this Part by it if those amounts were determined without reference to sections 123.3 and 123.4, that the number of days in the taxation year that are on or before October 31, 2011 is of the total of days in the taxation year, and

(B) 100/28 of the total of the amounts that would be deductible under subsection 126(1) from the tax for the year otherwise payable under this Part by it if those amounts were determined without reference to sections 123.3 and 123.4, that the number of days in the taxation year that are after October 31, 2011 is of the total of days in the taxation year,

(4) Subparagraph 125(1)(b)(ii) of the Act, as enacted by subsection (1), applies to the 2003 and subsequent taxation years.

(5) Subsection (2) applies to taxation years that begin after December 20, 2002, except that, in its application to a corporation described in subsection 181.1(3) of the Act for taxation years of the corporation that began before the day on which this Act receives royal assent, the description of B in subsection 125(5.1) of the Act, as enacted by subsection (2), is to be read as follows:

B is

(a) if, in both the particular taxation year and the preceding taxation year, the corporation is not associated with any corporation, the amount that would, but for subsections 181.1(2) and (4), be the corporation’s tax payable under Part I.3 for the preceding taxation year,

(b) if, in the particular taxation year, the corporation is not associated with any corporation but was associated with one or more corporations in the preceding taxation year, the amount that would, but for subsections 181.1(2) and (4), be the corporation’s tax payable under Part I.3 for the particular taxation year, and

(c) if, in the particular taxation year, the corporation is associated with one or more particular corporations, the amount determined by the formula

0.225% x (D – E)

where

D is the total of all amounts each of which is the taxable capital employed in Canada (within the meaning assigned by subsection 181.2(1) or 181.3(1) or section 181.4, as the case may be) of the corporation or of any of the particular corporations for its last taxation year that ended in the preceding calendar year, and

E is $10 million.

263. (1) Subparagraph 125.1(1)(b)(ii) of the Act is replaced by the following:

(2) The definition “bénéfices de fabrication et de transformation au Canada” in subsection 125.1(3) of the French version of the Act is replaced by the following:

« bénéfices de fabrication et de transformation au Canada »
“Canadian manufacturing and processing profits”

« bénéfices de fabrication et de transformation au Canada » En ce qui concerne une société pour une année d’imposition, la partie du total des montants représentant chacun le revenu que la société a tiré pour l’année d’une entreprise exploitée activement au Canada, déterminée en vertu des règles établies à cette fin par règlement pris sur recommandation du ministre des Finances, qui doit s’appliquer à la fabrication ou à la transformation au Canada de marchandises destinées à la vente ou à la location.

(3) Subparagraphs (l)(i) and (ii) of the definition “fabrication ou transformation” in subsection 125.1(3) of the French version of the Act are replaced by the following:

(i) de la vente ou de la location de marchandises qu’elle a fabriquées ou transformées au Canada,

(ii) de la fabrication ou de la transformation au Canada de marchandises destinées à la vente ou à la location, sauf des marchandises qu’elle devait vendre ou louer elle-même.

(4) Subsection (1) applies to the 2003 and subsequent taxation years.

264. (1) The definition “taxable resource income” in subsection 125.11(1) of the Act, as it read immediately before it was repealed by S.C. 2003, c. 28, s. 13(2), is replaced by the following:

“taxable resource income”
« revenu imposable provenant de ressources »

“taxable resource income”, of a taxpayer for a taxation year, is the lesser of

(a) the amount, if any, by which the taxpayer’s taxable income for the taxation year exceeds 100/16 of the amount deducted under subsection 125(1) from the taxpayer’s tax otherwise payable under this Part for the year, and

(b) the amount determined by the formula

3(A/B) + C – D – E

where

A is the total of all amounts each of which is deducted by the taxpayer under paragraph 20(1)(v.1) in computing the taxpayer’s income for the taxation year,

B is the percentage that is the total of

(i) that proportion of 100% that the number of days in the taxation year that are before 2003 is of the number of days in the taxation year,

(ii) that proportion of 90% that the number of days in the taxation year that are in 2003 is of the number of days in the taxation year,

(iii) that proportion of 75% that the number of days in the taxation year that are in 2004 is of the number of days in the taxation year,

(iv) that proportion of 65% that the number of days in the taxation year that are in 2005 is of the number of days in the taxation year, and

(v) that proportion of 35% that the number of days in the taxation year that are in 2006 is of the number of days in the taxation year,

C is total of all amounts included in computing the taxpayer’s income for the taxation year under paragraph 59(3.2)(b) or (c),

D is the total of all amounts deducted by the taxpayer under any of sections 65 to 66.7, other than subsections 66(4), 66.21(4) and 66.7(2) and (2.3), of this Act, and subsections 17(2) and (6) and section 29 of the Income Tax Application Rules, in computing the taxpayer’s income for the taxation year, and

E is 100/16 of the amount deducted under subsection 125(1) from the taxpayer’s tax otherwise payable under this Part for the year.

(2) The definition “taxable resource income” in subsection 125.11(1) of the Act, as enacted by subsection (1), is repealed.

(3) Subsection (1) applies to taxation years that begin after February 27, 2004.

(4) Subsection (2) applies to taxation years that begin after 2006.

265. (1) Section 125.2 of the Act is repealed.

(2) Subsection (1) applies to taxation years that begin after October 31, 2011.

266. (1) Paragraph 125.3(1.1)(b) of the Act is replaced by the following:

(b) the amount, if any, by which its tax payable under this Part (determined without reference to this section) for the year exceeds the amount that would, but for subsections 181.1(4) and 190.1(3), be the total of its taxes payable under Parts I.3 and VI for the year.

(2) Subsection (1) applies to taxation years that begin after October 31, 2011.

267. (1) The portion of subsection 126(2.22) of the French version of the Act before paragraph (a) is replaced by the following:

Ancien résident — bénéficiaire de fiducie

(2.22) Lorsqu’un particulier non-résident dispose, au cours d’une année d’imposition donnée, d’un bien qu’il a acquis la dernière fois à un moment (appelé « moment de l’acquisition » au présent paragraphe) à l’occasion d’une distribution effectuée après le 1^er octobre 1996 et à laquelle les alinéas 107(2)a) à c) ne s’appliquent pas par le seul effet du paragraphe 107(5), la fiducie peut déduire de son impôt payable par ailleurs en vertu de la présente partie pour l’année (appelée « année de la distribution » au présent paragraphe) qui comprend le moment de l’acquisition un montant ne dépassant pas le moins élevé des montants suivants :

(2) The portion of paragraph 126(2.22)(a) of the French version of the Act after subparagraph (ii) and before subparagraph (iii) is replaced by the following:

s’il est raisonnable de considérer que le montant a été payé sur la partie de tout gain ou bénéfice tiré de la disposition du bien qui s’est accumulée avant la distribution et après le dernier en date des moments ci-après, antérieur à la distribution :

(3) Subparagraphs 126(2.22)(b)(i) and (ii) of the French version of the Act are replaced by the following:

(i) le montant d’impôt en vertu de la présente partie qui était payable par ailleurs par la fiducie pour l’année de la distribution, compte tenu de l’application du présent paragraphe aux dispositions effectuées avant le moment de la disposition,

(ii) le montant de cet impôt qui aurait été payable par la fiducie pour l’année de la distribution si le bien n’avait pas été distribué au particulier.

(4) Section 126 of the Act is amended by adding the following after subsection (4.1):

Denial of foreign tax credit

(4.11) If a taxpayer is a member of a partnership, any income or profits tax paid to the government of a particular country other than Canada — in respect of the income of the partnership for a period during which the taxpayer’s direct or indirect share of the income of the partnership under the income tax laws (referred to in subsection (4.12) as the “relevant foreign tax law”) of any country other than Canada under the laws of which any income of the partnership is subject to income taxation, is less than the taxpayer’s direct or indirect share of the income for the purposes of this Act — is not included in computing the taxpayer’s business-income tax or non-business-income tax for any taxation year.

Exceptions

(4.12) For the purposes of subsection (4.11), a taxpayer is not to be considered to have a lesser direct or indirect share of the income of a partnership under the relevant foreign tax law than for the purposes of this Act solely because of one or more of the following:

(a) a difference between the relevant foreign tax law and this Act in the manner of

(i) computing the income of the partnership, or

(ii) allocating the income of the partnership because of the admission to, or withdrawal from, the partnership of any of its members;

(b) the treatment of the partnership as a corporation under the relevant foreign tax law; or

Tiered partnerships

(4.13) For the purposes of subsections (4.11) and (4.12), if a taxpayer is (or is deemed by this subsection to be) a member of a particular partnership that is a member of another partnership, the taxpayer is deemed to be a member of the other partnership.

(5) The description of A in subsection 126(4.2) of the Act is replaced by the following:

A is

(a) if the foreign tax would otherwise be included in business-income tax, the total of

(i) that proportion of 26.5% that the number of days in the taxation year that are in 2011 is of the number of days in the taxation year, and

(ii) that proportion of 25% that the number of days in the taxation year that are after 2011 is of the number of days in the taxation year, and

(b) if the foreign tax would otherwise be included in non-business-income tax, the total of

(i) if the taxpayer is a corporation that is a Canadian-controlled private corporation throughout the taxation year, that proportion of 28% that the number of days in the taxation year that are after 2010 is of the number of days in the taxation year, and

(ii) if the taxpayer is not a Canadian-controlled private corporation throughout the taxation year, the total of

(A) that proportion of 16.5% that the number of days in the taxation year that are in 2011 is of the number of days in the taxation year, and

(B) that proportion of 15% that the number of days in the taxation year that are after 2011 is of the number of days in the taxation year,

(6) Paragraph 126(4.4)(a) of the Act is replaced by the following:

(a) a disposition or acquisition of property deemed to be made by subsection 10(12) or (13), 14(14) or (15) or 45(1), section 70, 128.1 or 132.2, subsections 138(11.3) or 142.5(2), paragraph 142.6(1)(b) or subsections 142.6(1.1) or (1.2) or 149(10) is not a disposition or acquisition, as the case may be; and

(7) Subparagraph 126(5)(a)(i) of the Act is replaced by the following:

(i) the amount obtained by multiplying the taxpayer’s income from the business in the taxing country for the year by the total of

(A) that proportion of 26.5% that the number of days in the taxation year that are in 2011 is of the number of days in the taxation year, and

(B) that proportion of 25% that the number of days in the taxation year that are after 2011 is of the number of days in the taxation year

(8) Subsection 126(6) of the Act is amended by striking out “and” at the end of paragraph (b), by adding “and” at the end of paragraph (c) and by adding the following after paragraph (c):

(d) if, in computing a taxpayer’s income for a taxation year from a business carried on by the taxpayer in Canada, an amount is included in respect of interest paid or payable to the taxpayer by a person resident in a country other than Canada, and the taxpayer has paid to the government of that other country a non-business income tax for the year with respect to the amount, the amount is, in applying the definition “qualifying incomes” in subsection (7) for the purpose of subsection (1), deemed to be income from a source in that other country.

(9) The portion of the definition “business-income tax” in subsection 126(7) of the Act before paragraph (a) is replaced by the following:

“business-income tax”
« impôt sur le revenu tiré d’une entreprise »

“business-income tax” paid by a taxpayer for a taxation year in respect of businesses carried on by the taxpayer in a country other than Canada (referred to in this definition as the “business country”) means, subject to subsections (4.1) to (4.2), the portion of any income or profits tax paid by the taxpayer for the year to the government of a country other than Canada that can reasonably be regarded as tax in respect of the income of the taxpayer from a business carried on by the taxpayer in the business country, but does not include a tax, or the portion of a tax, that can reasonably be regarded as relating to an amount that

(10) The portion of the definition “non-business-income tax” in subsection 126(7) of the Act before paragraph (a) is replaced by the following:

“non-business-income tax”
« impôt sur le revenu ne provenant pas d’une entreprise »

“non-business-income tax” paid by a taxpayer for a taxation year to the government of a country other than Canada means, subject to subsections (4.1) to (4.2), the portion of any income or profits tax paid by the taxpayer for the year to the government of that country that

(11) Subsections (4), (9) and (10) apply to income or profits tax paid for taxation years of a taxpayer that end after March 4, 2010, except that, for taxation years of the taxpayer that end on or before August 27, 2010,

(a) subsection 126(4.11) of the Act, as enacted by subsection (4), is to be read as follows:

(4.11) If a taxpayer is a member of a partnership, any income or profits tax paid to the government of a particular country other than Canada — in respect of the income of the partnership for a period during which the taxpayer’s share of the income of the partnership under the income tax laws (referred to in subsection (4.12) as the “relevant foreign tax law”) of any country other than Canada under the laws of which the income of the partnership is subject to income taxation, is less than the taxpayer’s share of the income for the purposes of this Act — is not included in computing the taxpayer’s business-income tax or non-business-income tax for any taxation year.

(b) the portion of subsection 126(4.12) of the Act before paragraph (a), as enacted by subsection (4), is to be read as follows:

(4.12) For the purposes of subsection (4.11), a taxpayer is not to be considered to have a lesser share of the income of a partnership under the relevant foreign tax law than for the purposes of this Act solely because of one or more of the following:

(12) Subsections (5) and (7) apply to taxation years that begin after October 31, 2011.

(13) Subsection (6) applies to dispositions and acquisitions that occur after 1998, except that, in applying paragraph 126(4.4)(a) of the Act, as enacted by subsection (6), to dispositions and acquisitions that occur before June 28, 1999, that paragraph is to be read without reference to “10(12) or (13), 14(14) or (15), or”.

(14) Subsection (8) applies to amounts received after February 27, 2004.

268. (1) Section 126.1 of the Act is repealed.

(2) Subsection (1) applies in respect of forms filed after March 20, 2003.

269. (1) Paragraphs 127(1)(a) and (b) of the French version of the Act are replaced by the following:

a) les 2/3 de tout impôt sur les opérations forestières, payé par le contribuable au gouvernement d’une province sur le revenu pour l’année tiré d’opérations forestières dans cette province;

b) 6 2/3% du revenu du contribuable pour l’année, tiré d’opérations forestières dans la province, dont fait mention l’alinéa a).

(2) The definition “revenu pour l’année tiré des opérations forestières dans la province” in subsection 127(2) of the French version of the Act is repealed.

(3) The definition “impôt sur les opérations forestières” in subsection 127(2) of the French version of the Act is replaced by the following:

« impôt sur les opérations forestières »
“logging tax”

« impôt sur les opérations forestières » Impôt levé par la législature d’une province et qui est, par règlement, déclaré être un impôt d’application générale sur le revenu tiré d’opérations forestières.

(4) Subsection 127(2) of the French version of the Act is amended by adding the following in alphabetical order:

« revenu pour l’année tiré d’opérations forestières dans la province »
“income for the year from logging operations in the province”

« revenu pour l’année tiré d’opérations forestières dans la province » S’entend au sens du règlement.

(5) The portion of subsection 127(3) of the Act before paragraph (a) is replaced by the following:

Contributions to registered parties and candidates

(3) There may be deducted from the tax otherwise payable by a taxpayer under this Part for a taxation year in respect of the total of all amounts each of which is the eligible amount of a monetary contribution that is referred to in the Canada Elections Act and that is made by the taxpayer in the year to a registered party, a registered association or a candidate, as those terms are defined in that Act,

(6) Subsection 127(4.2) of the Act, as it read immediately before it was repealed by S.C. 2006, c. 9, s. 64(2), is replaced by the following:

Allocation of amount contributed among partners

(4.2) If at the end of a fiscal period of a partnership a taxpayer is a member of the partnership, the taxpayer’s share of the total that would, if the partnership were a person and its fiscal period were its taxation year, be the total referred to in subsection (3) in respect of the partnership for that taxation year is deemed for the purpose of that subsection to be a monetary contribution made by the taxpayer in the taxpayer’s taxation year in which the fiscal period of the partnership ends.

(7) Subsection 127(4.2) of the Act, as enacted by subsection (6), is repealed.

(8) The definition “eligible salary and wages” in subsection 127(9) of the Act is replaced by the following:

“eligible salary and wages”
« traitement et salaire admissibles »

“eligible salary and wages” payable by a taxpayer to an eligible apprentice means the amount, if any, that is the salary and wages payable by the taxpayer to the eligible apprentice in respect of the first 24 months of the apprenticeship (other than a qualified expenditure incurred by the taxpayer in a taxation year, remuneration that is based on profits, bonuses, amounts described in section 6 or 7, and amounts deemed to be incurred by subsection 78(4));

(9) Paragraph (b) of the definition “pre-production mining expenditure” in subsection 127(9) of the Act is replaced by the following:

(b) is not an expense that

(i) was renounced under subsection 66(12.6) to the taxable Canadian corporation except if the corporation is, on the effective date of the renunciation,

(A) a corporation that would be a “principal business corporation”, as defined in subsection 66(15), if that definition were read without reference to its paragraphs (a), (a.1), (f), (h) and (i), and

(B) the sole shareholder of the corporation that renounced the expenditure, or

(ii) is a member’s share of an expense incurred by a partnership unless the expense was deemed by subsection 66(18) to have been made or incurred at the end of the fiscal period of the partnership by the member and throughout the fiscal period of the partnership in which the expense was incurred

(A) each member of the partnership would (otherwise than because of being a member of the partnership) be a “principal-business corporation” as defined in subsection 66(15) of the Act, if that definition were read without reference to its paragraphs (a), (a.1), (f), (h) and (i), and

(B) the corporation is a member of the partnership at the time the expenditure is incurred and would not be a specified member of the partnership if the definition “specified member” in subsection 248(1) were read without reference to its subparagraph (b)(ii),

(10) Paragraphs 127(27)(b) and (c) of the Act are replaced by the following:

(b) the cost, or a portion of the cost, of the particular property was a qualified expenditure, or would if this Act were read without reference to subsection (26) be a qualified expenditure, to the taxpayer,

(c) the cost, or the portion of the cost, of the particular property is included, or would if this Act were read without reference to subsection (26) be included, in an amount, a percentage of which can reasonably be considered to be included in computing the taxpayer’s investment tax credit at the end of the taxation year, and

(11) The portion of subsection 127(27) of the Act after paragraph (d) is replaced by the following:

there shall be added to the taxpayer’s tax otherwise payable under this Part for the year the lesser of

(e) the amount that can reasonably be considered to be included in the taxpayer’s investment tax credit at the end of any taxation year, or that would be so included if this Act were read without reference to subsection (26), in respect of the particular property, and

(f) the amount that is the percentage — that is the sum of each percentage described in paragraph (c) that has been applied to compute the taxpayer’s investment tax credit in respect of the particular property — of

(i) in the case where the particular property or the other property is disposed of to a person who deals at arm’s length with the taxpayer,

(A) the proceeds of disposition of the property, if the property

(I) is the particular property and is neither first term shared-use equipment nor second term shared-use equipment, or

(II) is the other property,

(B) 25% of the proceeds of disposition of the property, if the property is the particular property, is first term shared-use equipment and is not second term shared-use equipment, and

(C) 50% of the proceeds of disposition of the property, if the property is the particular property and is second term shared-use equipment, and

(ii) in the case where the particular property or the other property is converted to commercial use or is disposed of to a person who does not deal at arm’s length with the taxpayer,

(A) the fair market value of the property, if the property

(I) is the particular property and is neither first term shared-use equipment nor second term shared-use equipment, or

(II) is the other property,

(B) 25% of the fair market value of the property at the time of its conversion or disposition, if the particular property is first term shared-use equipment and is not second term shared-use equipment, and

(C) 50% of the fair market value of the property at the time of its conversion or disposition, if the particular property is second term shared-use equipment.

(12) Subsection (5) applies to monetary contributions made after December 20, 2002, except that, for monetary contributions made before 2004, the reference to “to a registered party, a registered association or a candidate” in subsection 127(3) of the Act, as amended by subsection (5), is to be read as a reference to “to a registered party or a candidate”.

(13) Subsection (6) applies to monetary contributions made after December 20, 2002 and before 2007.

(14) Subsection (7) is deemed to have come into force on January 1, 2007, except that it does not apply in respect of monetary contributions made before that day.

(15) Subsection (8) applies to taxation years that end after November 5, 2010.

(16) Subsection (9) applies to the 2003 and subsequent taxation years.

(17) Subsections (10) and (11) apply to dispositions and conversions that occur after December 20, 2002.

270. (1) Paragraph (b) of the definition “approved share” in subsection 127.4(1) of the Act is replaced by the following:

(b) a share issued by a prescribed labour-sponsored venture capital corporation that is not a registered labour-sponsored venture capital corporation if, at the time of the issue, no province under the laws (described in section 6701 of the Income Tax Regulations) of which the corporation is registered or established provides assistance in respect of the acquisition of the share;

(2) Subsection 127.4(6) of the Act is amended by striking out “and” at the end of paragraph (c), by adding “and’’ at the end of paragraph (d) and by adding the following after paragraph (d):

(e) nil, if the share is issued in exchange for another share of the corporation.

(3) Subsection (1) applies to acquisitions of shares that occur after 2003.

(4) Subsection (2) applies to the 2004 and subsequent taxation years.

271. (1) The portion of subparagraph 127.52(1)(d)(ii) of the Act before the formula is replaced by the following:

(ii) each amount that is designated by a trust for a particular year of the trust in respect of the individual and deemed by subsection 104(21) to be a taxable capital gain for the year of the individual were equal to the amount obtained by the formula

(2) Paragraph 127.52(1)(d) of the Act is amended by striking out “and” at the end of subparagraph (i), by adding “and” at the end of subparagraph (ii) and by adding the following after subparagraph (ii):

(iii) this Act were read without reference to subsection 104(21.6);

(3) Paragraph 127.52(1)(d) of the Act, as amended by subsections (1) and (2), is amended by adding “and” at the end of subparagraph (i), by striking out “and” at the end of subparagraph (ii) and by repealing subparagraph (iii).

(4) Paragraph 127.52(1)(e) of the Act is amended by striking out “and” at the end of subparagraph (i) and by adding the following after subparagraph (i):

(i.1) the individual’s income for the year from property, or from the business of selling the product of property, described in Class 43.1 or 43.2 in Schedule II to the Income Tax Regulations, determined before deducting those amounts, and

(5) Subparagraph 127.52(1)(h)(i) of the Act is replaced by the following:

(i) the amounts deducted under any of subsections 110(2), 110.6(2), (2.1), (2.2) and (12) and 110.7(1),

(6) Subsections (1) and (3) apply to taxation years that begin after October 31, 2011.

(7) Subsection (2) applies to the 2000 and subsequent taxation years.

(8) Subsection (4) applies in respect of taxation years that end after 2008.

272. (1) Subparagraph 128(2)(g)(iii) of the Act is replaced by the following:

(iii) the individual’s unused tuition, textbook and education tax credits (as determined under subsection 118.61(1)) at the end of the last taxation year that ended before that time is deemed to be nil;

(2) Subsection (1) applies to the 2006 and subsequent taxation years.

273. (1) The portion of subsection 128.1(5) of the Act before paragraph (b) is replaced by the following:

Instalment interest

(5) If an individual is deemed by subsection (4) to have disposed of a property in a taxation year, in applying sections 155 and 156 and subsections 156.1(1) to (3) and 161(2), (4) and (4.01) and any regulations made for the purposes of those provisions, the individual’s total tax payable under this Part for the year is deemed to be the lesser of

(a) the individual’s total tax payable under this Part for the year, determined before taking into consideration the specified future tax consequences for the year, and

(2) Paragraph 128.1(7)(b) of the French version of the Act is replaced by the following:

b) est propriétaire, à ce moment, d’un bien qu’il a acquis, la dernière fois, à l’occasion d’une distribution à laquelle le paragraphe 107(2) se serait appliqué, n’eût été le paragraphe 107(5), effectuée par une fiducie à un moment (appelé « moment de la distribution » au présent paragraphe) postérieur au 1^er octobre 1996 et antérieur au moment donné;

(3) Paragraph 128.1(7)(d) of the French version of the Act is replaced by the following:

d) sous réserve des alinéas e) et f), si le particulier et la fiducie en font conjointement le choix dans un document présenté au ministre au plus tard à la première en date des dates d’échéance de production qui leur est applicable pour leur année d’imposition qui comprend le moment donné, le paragraphe 107(2.1) ne s’applique pas à la distribution pour ce qui est des biens que le particulier a acquis à l’occasion de la distribution et qui étaient des biens canadiens imposables lui appartenant tout au long de la période ayant commencé au moment de la distribution et se terminant au moment donné;

(4) Subparagraph 128.1(7)(e)(i) of the French version of the Act is replaced by the following:

(i) il résidait au Canada au moment de la distribution,

(5) Subparagraphs 128.1(7)(f)(i) and (ii) of the French version of the Act are replaced by the following:

(i) malgré l’alinéa 107(2.1)a), la fiducie est réputée avoir disposé du bien au moment de la distribution pour un produit de disposition égal au total des montants suivants :

(A) le coût indiqué du bien pour elle immédiatement avant ce moment,

(B) l’excédent du montant de la réduction prévue au paragraphe 40(3.7) et dont il est question à l’alinéa e), sur le moins élevé des montants suivants :

(I) le coût indiqué du bien pour la fiducie immédiatement avant le moment de la distribution,

(II) le montant que le particulier et la fiducie ont indiqué conjointement pour l’application du présent alinéa dans le document concernant le choix prévu à l’alinéa d) relativement au bien,

(ii) malgré l’alinéa 107(2.1)b), le particulier est réputé avoir acquis le bien au moment de la distribution à un coût égal à l’excédent du montant déterminé par ailleurs selon l’alinéa 107(2)b) sur le montant de la réduction prévue au paragraphe 40(3.7) et dont il est question à l’alinéa e), ou, s’il est moins élevé, le montant indiqué selon la subdivision (i)(B)(II);

(6) The portion of paragraph 128.1(7)(g) of the French version of the Act before subparagraph (i) is replaced by the following:

g) si le particulier et la fiducie en font conjointement le choix, dans un document présenté au ministre au plus tard à la dernière en date des dates d’échéance de production qui leur est applicable pour leur année d’imposition qui comprend le moment donné, relativement à chaque bien dont le particulier a été propriétaire tout au long de la période ayant commencé au moment de la distribution et se terminant au moment donné et dont il est réputé, par l’alinéa (1)b), avoir disposé du fait qu’il est devenu un résident du Canada, le produit de disposition pour la fiducie, selon l’alinéa 107(2.1)a), au moment de la distribution et le coût d’acquisition du bien pour le particulier au moment donné sont réputés, malgré les alinéas 107(2.1)a) et b), correspondre à ce produit et à ce coût, déterminés compte non tenu du présent alinéa, diminués du moins élevé des montants suivants :

(7) The portion of paragraph 128.1(7)(i) of the French version of the Act before subparagraph (i) is replaced by the following:

i) malgré les paragraphes 152(4) à (5), le ministre établit, pour tenir compte des choix prévus au présent paragraphe, toute cotisation concernant l’impôt payable par la fiducie ou le particulier en vertu de la présente loi pour toute année qui est antérieure à l’année comprenant le moment donné sans être antérieure à l’année comprenant le moment de la distribution; pareille cotisation est toutefois sans effet sur le calcul des montants suivants :

(8) Subsection (1) applies to taxation years that begin after October 31, 2011.

274. (1) Section 128.3 of the Act is replaced by the following:

Former resident — replaced shares

128.3 If, in a transaction to which section 51, subparagraphs 85.1(1)(a)(i) and (ii), subsection 85.1(8) or section 86 or 87 applies, a person acquires a share (in this section referred to as the “new share”) in exchange for another share or equity in a SIFT wind-up entity (in this section referred to as the “old share”), for the purposes of section 119, subsections 126(2.21) to (2.23), subparagraph 128.1(4)(b)(iv) and subsections 128.1(6) to (8), 180.1(1.4) and 220(4.5) and (4.6), the person is deemed not to have disposed of the old share, and the new share is deemed to be the same share as the old share.

(2) Subsection (1) applies to taxation years that begin after 2001, except that, before December 20, 2007, section 128.3 of the Act, as enacted by subsection (1), is to be read as follows:

128.3 If, in a transaction to which section 51, subparagraphs 85.1(1)(a)(i) and (ii) or section 86 or 87 applies, a person acquires a share (in this section referred to as the “new share”) in exchange for another share (in this section referred to as the “old share”), for the purposes of section 119, subsections 126(2.21) to (2.23), subparagraph 128.1(4)(b)(iv) and subsections 128.1(6) to (8), 180.1(1.4) and 220(4.5) and (4.6), the person is deemed not to have disposed of the old share, and the new share is deemed to be the same share as the old share.

275. (1) Clauses 129(3)(a)(ii)(B) and (C) of the Act are replaced by the following:

(B) 100/35 of the total of amounts deducted under subsection 126(1) from its tax for the year otherwise payable under this Part, and

(C) the amount determined by multiplying the total of amounts deducted under subsection 126(2) from its tax for the year otherwise payable under this Part, by the relevant factor for the year, and

(2) Subparagraph 129(3)(a)(iii) of the Act is replaced by the following:

(iii) the corporation’s tax for the year payable under this Part,

(3) Clause 129(3)(a)(ii)(B) of the Act, as enacted by subsection (1), applies to taxation years that begin after October 31, 2011.

(4) Clause 129(3)(a)(ii)(C) of the Act, as enacted by subsection (1), applies to the 2003 and subsequent taxation years.

(5) Subsection (2) applies to taxation years that begin after 2007.

276. (1) Paragraph 130.1(4)(b) of the Act is replaced by the following:

(b) notwithstanding any other provision of this Act, if an amount is received by a taxpayer in a taxation year as, on account of, in lieu of payment of or in satisfaction of, the dividend, the amount

(i) shall not be included in computing the taxpayer’s income for the year as income from a share of the capital stock of the corporation, and

(ii) is deemed to be a capital gain of the taxpayer from the disposition of capital property in the year.

(2) Subsections 130.1(4.2) to (4.5) of the Act are repealed.

(3) Subparagraph 130.1(6)(f)(i) of the Act is replaced by the following:

(i) debts owing to the corporation that were secured, whether by mortgages, hypothecs or in any other manner, on houses (as defined in section 2 of the National Housing Act) or on property included within a housing project (as defined in that section as it read on June 16, 1999), and

(4) Subsections (1) and (2) apply to taxation years that begin after October 31, 2011, except that if any part of a dividend declared by a corporation is in respect of capital gains of the corporation from dispositions of property that occurred before October 18, 2000, then paragraph 130.1(4)(b) of the Act, as enacted by subsection (1), is to be read, in its application to that part of the dividend, as it read in its application to the corporation’s last taxation year that began before November 1, 2011.

(5) Subsection (3) applies to property acquired by a corporation after October 31, 2011, unless

(a) the property is a particular debt

(i) that is owing to the corporation and secured on property (referred to in this paragraph as the “subject property”),

(ii) that replaces a debt (referred to in this paragraph as the “old debt”) that was on October 31, 2011 owing to the corporation and secured on the subject property, and

(iii) that has a maximum term for repayment that does not exceed the maximum term for repayment, in effect on October 31, 2011, of the old debt; and

(b) the corporation would be a mortgage investment corporation for its taxation year that includes October 31, 2011 if that taxation year were determined as though it ended on October 31, 2011.

(6) If property that is held by a corporation on October 31, 2011 consists of debt, the term for repayment of the debt is extended by agreement entered into on a particular date that is after October 31, 2011, and the extended term exceeds the maximum term for repayment of the debt in effect on October 31, 2011, then the property is deemed, for the purposes of applying subsection (5), to have been acquired by the corporation on the particular date.

277. (1) Paragraph 131(1)(b) of the Act is replaced by the following:

(b) notwithstanding any other provision of this Act (other than paragraph (5.1)(b)), if an amount is received by a taxpayer in a taxation year as, on account of, in lieu of payment of or in satisfaction of, the dividend, the amount

(i) shall not be included in computing the taxpayer’s income for the year as income from a share of the capital stock of the corporation, and

(ii) is deemed to be a capital gain of the taxpayer from the disposition of capital property in the year.

(2) Subsections 131(1.5) to (1.9) of the Act are repealed.

(3) Subparagraph 131(5.1)(b)(i) of the Act is replaced by the following:

(i) subparagraph (1)(b)(ii) does not apply in respect of the dividend, to the extent of the TCP gains distribution, and

(4) Paragraph (a) of the definition “capital gains dividend account” in subsection 131(6) of the Act is replaced by the following:

(a) the total of

(i) its capital gains, for all taxation years that began more than 60 days before that time, from dispositions of property after 1971 and before that time while it was a mutual fund corporation, and

(ii) all amounts each of which is an amount in respect of a distribution made by a trust to the corporation, at a time that is after its 2004 taxation year and at which it is a mutual fund corporation, in respect of capital gains of the trust equal to twice the amount determined by the following formula:

A – B

where

A is the amount of the distribution, and

B is the amount designated under subsection 104(21) by the trust in respect of the net taxable capital gains of the trust attributable to those capital gains

(5) Subparagraph (b)(iii) of the definition “capital gains dividend account” in subsection 131(6) of the Act is replaced by the following:

(iii) an amount equal to 100/14 of its capital gains refund for any taxation year throughout which it was a mutual fund corporation where the year ended more than 60 days before that time;

(6) Subsections (1) to (3) and (5) apply to taxation years that begin after October 31, 2011, except that

(a) if any part of a dividend declared by a corporation is in respect of capital gains of the corporation from dispositions of property that occurred before October 18, 2000, then paragraph 131(1)(b) of the Act, as enacted by subsection (1), is to be read, in its application to that part of the dividend, as it read in its application to the corporation’s last taxation year that began before November 1, 2011; and

(b) if a corporation had a capital gains refund for a taxation year that began before November 2011, then in computing the capital gains dividend account of the corporation at any time in a taxation year of the corporation that begins after October 31, 2011, subparagraph (b)(iii) of the definition “capital gains dividend account” in subsection 131(6) of the Act, as enacted by subsection (5), is to be read, in its application to the corporation, as it read in its application to the corporation’s last taxation year that began before November 1, 2011.

(7) Subsection (4) applies to the 2005 and subsequent taxation years.

278. (1) Paragraph 132(6)(c) of the Act is replaced by the following:

(2) Subsection (1) applies to the 2000 and subsequent taxation years.

279. (1) Paragraph 132.11(1)(b) of the Act is replaced by the following:

(b) if the trust’s taxation year ends on December 15 because of paragraph (a), subject to subsection (1.1), each subsequent taxation year of the trust is deemed to be the period that begins at the beginning of December 16 of a calendar year and ends at the end of December 15 of the following calendar year or at any earlier time that is determined under paragraph 132.2(3)(b) or subsection 142.6(1); and

(2) Paragraph 132.11(1)(c) of the French version of the Act is replaced by the following:

c) chacun de ses exercices qui soit commence dans une de ses années d’imposition se terminant le 15 décembre par l’effet de l’alinéa a), soit se termine dans une de ses années d’imposition ultérieures, doit prendre fin au plus tard à la fin de l’année où il a commencé.

(3) Subsection 132.11(4) of the Act is replaced by the following:

Amounts paid or payable to beneficiaries

(4) Notwithstanding subsection 104(24), for the purposes of subsections (5) and (6) and 104(6) and (13) and paragraph (i) of the definition “disposition” in subsection 248(1) each amount that is paid, or that becomes payable, by a trust to a beneficiary after the end of a particular taxation year of the trust that ends on December 15 of a calendar year because of subsection (1) and before the end of that calendar year, is deemed to have been paid or to have become payable, as the case may be, to the beneficiary at the end of the particular year and not at any other time.

(4) Subsection (1) is deemed to have come into force on January 1, 1999, except that, in applying paragraph 132.11(1)(b) of the Act, as enacted by subsection (1), to taxation years that end before 2000, that paragraph is to be read without reference to “subject to subsection (1.1)”.

(5) Subsection (2) applies to the 1998 and subsequent taxation years.

(6) Subsection (3) applies to amounts that, after 1999, are paid or have become payable by a trust.

280. (1) Section 132.2 of the Act is replaced by the following:

Definitions re qualifying exchange of mutual funds

132.2 (1) The following definitions apply in this section.

“first post-exchange year”
« première année suivant l’échange »

“first post-exchange year”, of a fund in respect of a qualifying exchange, means the taxation year of the fund that begins immediately after the acquisition time.

“qualifying exchange”
« échange admissible »

“qualifying exchange” means a transfer at any time (in this section referred to as the “transfer time”) of all or substantially all of the property of a mutual fund corporation (other than a SIFT wind-up corporation) or a mutual fund trust to a mutual fund trust (in this section referred to as the “transferor” and “transferee”, respectively, and as the “funds”) if

(a) all or substantially all of the shares issued by the transferor and outstanding immediately before the transfer time are within 60 days after the transfer time disposed of to the transferor;

(b) no person disposing of shares of the transferor to the transferor within that 60-day period (otherwise than pursuant to the exercise of a statutory right of dissent) receives any consideration for the shares other than units of the transferee; and

“share”
« action »

“share” means a share of the capital stock of a mutual fund corporation and a unit of a mutual fund trust.

Timing

(2) In respect of a qualifying exchange, a time referred to in the following list immediately follows the time that precedes it in the list

(a) the transfer time;

(b) the first intervening time;

(d) the beginning of the funds’ first post-exchange years;

(e) the depreciables disposition time;

(f) the second intervening time; and

(g) the depreciables acquisition time.

General

(3) In respect of a qualifying exchange,

(a) each property of a fund, other than property disposed of by the transferor to the transferee at the transfer time and depreciable property, is deemed to have been disposed of, and to have been reacquired by the fund, at the first intervening time, for an amount equal to the lesser of

(i) the fair market value of the property at the transfer time, and

(ii) the greater of

(A) its cost amount, and

(B) the amount that the fund designates in respect of the property in a notification to the Minister accompanying the election in respect of the qualifying exchange;

(b) subject to paragraph (l), the last taxation years of the funds that began before the transfer time are deemed to have ended at the acquisition time, and their first post-exchange years are deemed to have begun immediately after those last taxation years ended;

(c) each depreciable property of a fund (other than property to which subsection (5) applies and property to which paragraph (d) would, if this Act were read without reference to this paragraph, apply) is deemed to have been disposed of, and to have been reacquired, by the fund at the second intervening time for an amount equal to the lesser of

(i) the fair market value of the property at the depreciables disposition time, and

(ii) the greater of

(A) the lesser of its capital cost and its cost amount to the disposing fund at the depreciables disposition time, and

(B) the amount that the fund designates in respect of the property in a notification to the Minister accompanying the election in respect of the qualifying exchange;

(d) if at the second intervening time the undepreciated capital cost to a fund of depreciable property of a prescribed class exceeds the fair market value of all the property of that class, the excess is to be deducted in computing the fund’s income for the taxation year that includes the transfer time and is deemed to have been allowed in respect of property of that class under regulations made for the purpose of paragraph 20(1)(a);

(e) except as provided in paragraph (m), the transferor’s cost of any particular property received by the transferor from the transferee as consideration for the disposition of the property is deemed to be

(i) nil, if the particular property is a unit of the transferee, and

(ii) the particular property’s fair market value at the transfer time, in any other case;

(f) the transferor’s proceeds of disposition of any units of the transferee that were disposed of by the transferor at any particular time that is within 60 days after the transfer time in exchange for shares of the transferor, are deemed to be equal to the cost amount of the units to the transferor immediately before the particular time;

(g) if, at any particular time that is within 60 days after the transfer time, a taxpayer disposes of shares of the transferor to the transferor in exchange for units of the transferee

(i) the taxpayer’s proceeds of disposition of the shares and the cost to the taxpayer of the units are deemed to be equal to the cost amount to the taxpayer of the shares immediately before the particular time,

(ii) for the purposes of applying section 116 in respect of the disposition, the shares are deemed to be excluded property of the taxpayer,

(iii) where the qualifying exchange occurs after 2004, for the purposes of applying section 218.3 in respect of that exchange, the payment or crediting of the units to the taxpayer by the transferor is deemed not to be an assessable distribution,

(iv) where all of the taxpayer’s shares of the transferor have been so disposed of, for the purpose of applying section 39.1 in respect of the taxpayer after that disposition, the transferee is deemed to be the same entity as the transferor,

(v) for the purpose of the definition “designated beneficiary” in section 210, the units are deemed not to have been held at any time by the transferor, and

(vi) where the taxpayer is at the particular time affiliated with one or both of the funds,

(A) those units are deemed not to be identical to any other units of the transferee,

(B) if the taxpayer is the transferee, and the units cease to exist when the taxpayer acquires them (or, for greater certainty, when the taxpayer would but for that cessation have acquired them), the taxpayer is deemed

(I) to have acquired those units at the particular time, and

(II) to have disposed of those units immediately after the particular time for proceeds of disposition equal to the cost amount to the taxpayer of those units at the particular time, and

(C) in any other case, for the purpose of computing any gain or loss of the taxpayer from the taxpayer’s first disposition, after the particular time, of each of those units,

(I) if that disposition is a renunciation or surrender of the unit by the taxpayer for no consideration, and is not in favour of any person other than the transferee, the taxpayer’s proceeds of disposition of that unit are deemed to be equal to that unit’s cost amount to the taxpayer immediately before that disposition, and

(II) if subclause (I) does not apply, the taxpayer’s proceeds of disposition of that unit are deemed to be equal to the greater of that unit’s fair market value and its cost amount to the taxpayer immediately before that disposition;

(h) where a share to which paragraph (g) applies would, if this Act were read without reference to this paragraph, cease to be a qualified investment (within the meaning assigned by subsection 146(1), 146.1(1) or 146.3(1), section 204 or subsection 205(1) or 207.01(1)) as a consequence of the qualifying exchange, the share is deemed to be a qualified investment until the earlier of the day that is 60 days after the day that includes the transfer time and the time at which it is disposed of in accordance with paragraph (g);

(i) there shall be added to the amount determined under the description of A in the definition “refundable capital gains tax on hand” in subsection 132(4) in respect of the transferee for its taxation years that begin after the transfer time the amount, if any, by which

(i) the transferor’s refundable capital gains tax on hand (within the meaning assigned by subsection 131(6) or 132(4), as the case may be) at the end of its taxation year that includes the transfer time

exceeds

(ii) the transferor’s capital gains refund (within the meaning assigned by paragraph 131(2)(a) or 132(1)(a), as the case may be) for that year;

(j) no amount in respect of a non-capital loss, net capital loss, restricted farm loss, farm loss or limited partnership loss of a fund for a taxation year that began before the transfer time is deductible in computing the taxable income of either of the funds for a taxation year that begins after the transfer time;

(k) if the transferor is a mutual fund trust, for the purposes of subsections 132.1(1) and (3) to (5), the transferee is deemed after the transfer time to be the same mutual fund trust as, and a continuation of, the transferor;

(l) if the transferor is a mutual fund corporation

(i) for the purpose of subsection 131(4) but, for greater certainty, without having any effect on the computation of any amount determined under this Part, the transferor is deemed in respect of any share disposed of in accordance with paragraph (g) to be a mutual fund corporation at the time of the disposition, and

(ii) for the purpose of Part I.3 but, for greater certainty, without having any effect on the computation of any amount determined under this Part, the transferor’s taxation year that, if this Act were read without reference to this paragraph, would have included the transfer time is deemed to have ended immediately before the transfer time;

(m) for the purpose of determining the funds’ capital gains redemptions (as defined in subsection 131(6) or 132(4), as the case may be), for their taxation years that include the transfer time,

(i) the total of the cost amounts to the transferor of all its properties at the end of the year is deemed to be the total of all amounts each of which is

(A) the transferor’s proceeds of disposition of a property that was transferred to a transferee on the qualifying exchange, or

(B) the cost amount to the transferor at the end of the year of a property that was not transferred on the qualifying exchange, and

(ii) the transferee is deemed not to have acquired any property that was transferred to it on the qualifying exchange; and

(n) except as provided in subparagraph (l)(i), the transferor is, notwithstanding subsections 131(8) and 132(6), deemed to be neither a mutual fund corporation nor a mutual fund trust for taxation years that begin after the transfer time.

Qualifying exchange — non-depreciable property

(4) If a transferor transfers a property, other than a depreciable property, to a transferee in a qualifying exchange,

(a) the transferee is deemed to have acquired the property at the acquisition time and not to have acquired the property at the transfer time; and

(b) the transferor’s proceeds of disposition of the property and the transferee’s cost of the property are deemed to be the lesser of

(i) the fair market value of the property at the transfer time, and

(ii) the greatest of

(A) the cost amount to the transferor of the property at the transfer time,

(B) the amount that the funds agree on in respect of the property in their election, and

(C) the fair market value at the transfer time of the consideration (other than units of the transferee) received by the transferor for the disposition of the property.

Depreciable property

(5) If a transferor transfers a depreciable property to a transferee in a qualifying exchange,

(a) the transferor is deemed to have disposed of the property at the depreciables disposition time, and not to have disposed of the property at the transfer time;

(b) the transferee is deemed to have acquired the property at the depreciables acquisition time, and not to have acquired the property at the transfer time;

(c) the transferor’s proceeds of disposition of the property and the transferee’s cost of the property are deemed to be the lesser of

(i) the fair market value of the property at the transfer time, and

(ii) the greatest of

(A) the lesser of its capital cost and its cost amount to the transferor immediately before the depreciables disposition time,

(B) the amount that the funds agree on in respect of the property in their election, and

(C) the fair market value at the transfer time of the consideration (other than units of the transferee) received by the transferor for the disposition of the property;

(d) where the capital cost of the property to the transferor exceeds the transferor’s proceeds of disposition of the property under paragraph (c), for the purposes of sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a),

(i) the property’s capital cost to the transferee is deemed to be the amount that was its capital cost to the transferor, and

(ii) the excess is deemed to have been allowed to the transferee in respect of the property under regulations made for the purpose of paragraph 20(1)(a) in computing income for taxation years ending before the transfer time; and

(e) where two or more depreciable properties of a prescribed class are disposed of by the transferor to the transferee in the same qualifying exchange, paragraph (c) applies as if each property so disposed of had been separately disposed of in the order designated by the transferor at the time of making the election in respect of the qualifying exchange or, if the transferor does not so designate any such order, in the order designated by the Minister.

Due date

(6) The due date of an election referred to in paragraph (c) of the definition “qualifying exchange” in subsection (1) is

(a) the day that is six months after the day that includes the transfer time; and

(b) on joint application by the funds, any later day that the Minister accepts.

Amendment or Revocation of Election

(7) The Minister may, on joint application by the funds on or before the due date of an election referred to in paragraph (c) of the definition “qualifying exchange” in subsection (1), grant permission to amend or revoke the election.

(2) The definitions “first post-exchange year” and “share” in subsection 132.2(1) and subsections 132.2(2) to (5) of the Act, as enacted by subsection (1), apply to qualifying exchanges that occur after 1998, except that,

(a) if a qualifying exchange occurred before July 18, 2005 and the transferee has, before that day, filed a return of income, for any taxation year, that identified the realization of any loss that would not have been realized if paragraphs 132.2(3)(f) and (g) of the Act, as enacted by subsection (1), had applied in respect of the qualifying exchange, those paragraphs are to be read in their application to the qualifying exchange as follows:

(f) the transferor’s proceeds of disposition of any units of the transferee that were received by the transferor as consideration for the disposition of the property, and that were disposed of by the transferor within 60 days after the transfer time in exchange for shares of the transferor, are deemed to be nil;

(g) if, within 60 days after the transfer time, a taxpayer disposes of shares of the transferor to the transferor in exchange for units of the transferee

(ii) for the purposes of applying section 116 in respect of the disposition, the shares are deemed to be excluded property of the taxpayer,

(v) for the purpose of the definition “designated beneficiary” in section 210, the units are deemed not to have been held at any time by the transferor;

(b) before the 2008 taxation year, paragraph 132.2(3)(h) of the Act, as enacted by subsection (1), is to be read as follows:

(h) where a share to which paragraph (g) applies would, if this Act were read without reference to this paragraph, cease to be a qualified investment (within the meaning assigned by subsection 146(1), 146.1(1) or 146.3(1) or section 204) as a consequence of the qualifying exchange, the share is deemed to be a qualified investment until the earlier of the day that is 60 days after the transfer time and the time at which it is disposed of in accordance with paragraph (g);

and

(c) for the 2008 taxation year, paragraph 132.2(3)(h) of the Act, as enacted by subsection (1), is to be read as follows:

(h) where a share to which paragraph (g) applies would, if this Act were read without reference to this paragraph, cease to be a qualified investment (within the meaning assigned by subsection 146(1), 146.1(1) or 146.3(1), section 204 or subsection 205(1)) as a consequence of the qualifying exchange, the share is deemed to be a qualified investment until the earlier of the day that is 60 days after the transfer time and the time at which it is disposed of in accordance with paragraph (g);

(3) For qualifying exchanges that occurred after June 1994 and before 1999, paragraph 132.2(1)(j) of the Act is to be read as follows:

(j) where shares of the transferor have been disposed of by a taxpayer to the transferor in exchange for units of the transferee within 60 days after the transfer time,

(ii) if all of the taxpayer’s shares of the transferor have been so disposed of, for the purposes of applying section 39.1 in respect of the taxpayer after that disposition, the transferee is deemed to be the same entity as the transferor, and

(iii) for the purpose of the definition “designated beneficiary” in section 210, the units are deemed not to have been held at any time by the transferor;

(4) For qualifying exchanges that occurred after June 1994 and before 1999, subsection 132.2(1) of the Act is to be read as if it contained a paragraph (j.1) that read as follows:

(j.1) if shares of the transferor have been disposed of by a taxpayer to the tranferor in exchange for units of the transferee within 60 days after the transfer time, for the purposes of applying section 116 in respect of the disposition, the shares are deemed to be excluded property of the taxpayer;

(5) The definition “qualifying exchange” in subsection 132.2(1) and subsections 132.2(6) and (7) of the Act, as enacted by subsection (1), apply to transfers that occur after June 1994, except that, before December 20, 2007, the portion of the definition “qualifying exchange” in subsection 132.2(1) before paragraph (a), as enacted by subsection (1), is to be read as follows:

“qualifying exchange” means a transfer at any time (in this section referred to as the “transfer time”) of all or substantially all of the property of a mutual fund corporation or a mutual fund trust to a mutual fund trust (in this section referred to as the “transferor” and “transferee”, respectively, and as the “funds”) if

(6) If an election under paragraph (c) of the definition “qualifying exchange” in subsection 132.2(2) of the Act was made, the election continues to have the effect of having section 132.2 of the Act, as modified from time to time, apply to the transfer.

(7) If an election under subsection 159(4) of the Income Tax Amendments Act, 1997, S.C. 1998, c. 19, was made in respect of a transfer to read subsection 132.2(1) of the Income Tax Act without reference to paragraph 132.2(1)(p) of that Act, the election is, on the application of subsection (1), deemed to have the effect of reading subsection 132.2(3) of that Act, as enacted by subsection (1), in respect of the transfer without reference to its paragraph (i).

281. (1) Subsection 134.1(2) of the Act is replaced by the following:

Application

(2) For the purposes of applying subsections 104(10) and (11) and 133(6) to (9) (other than the definition “non-resident-owned investment corporation” in subsection 133(8)), section 212 and any tax treaty, a corporation described in subsection (1) is deemed to be a non-resident-owned investment corporation in its first non-NRO year in respect of dividends paid in that year on shares of its capital stock to a non-resident person, to a trust for the benefit of non-resident persons or their unborn issue or to a non-resident-owned investment corporation.

(2) Subsection (1) applies to a corporation that ceases to be a non-resident-owned investment corporation because of a transaction or an event that occurs, or a circumstance that arises, in a taxation year of the corporation that ends after February 27, 2000.

282. (1) Subsection 135.1(7) of the Act is replaced by the following:

Withholding on redemption

(7) A person or partnership (in this subsection referred to as the “redeeming entity”) that redeems, acquires or cancels a shareholder’s share shall withhold and forthwith remit to the Receiver General, on account of the shareholder’s tax liability, 15% from the amount otherwise payable on the redemption, acquisition or cancellation, if

(a) the share was, at the time it was issued, a tax deferred cooperative share;

(b) the redeeming entity is the corporation that issued the share, or a person or partnership with whom the corporation does not deal at arm’s length; and

(c) the shareholder is not a trust whose taxable income is exempt from tax under this Part because of paragraph 149(1)(r) or (x).

(2) Section 135.1 of the Act is amended by adding the following after subsection (8):

Application of subsection (10)

(9) Subsection (10) applies in respect of the disposition, after September 28, 2009, by a taxpayer of a tax deferred cooperative share (in this subsection and subsection (10) referred to as the “old share”) of an agricultural cooperative corporation if

(a) the disposition results from the acquisition, cancellation or redemption of the old share in the course of a reorganization of the capital of the corporation;

(b) in exchange for the old share the corporation issues to the taxpayer a share (in this subsection and subsection (10) referred to as the “new share”) that is described in all of paragraphs (b) to (d) of the definition “tax deferred cooperative share” in subsection (1); and

(c) the amount of paid-up capital, and the amount, if any, that the taxpayer is entitled to receive on a redemption, acquisition or cancellation, of the new share are equal to those amounts, respectively, in respect of the old share.

Shares issued on corporate reorganizations

(10) If this subsection applies in respect of an exchange of a taxpayer’s old share for a new share, for the purposes of this section (other than subsection (9)),

(a) the new share issued in exchange for the old share is deemed to have been issued, pursuant to an allocation in proportion to patronage, at the time the old share was issued; and

(b) provided that no person or partnership receives at any time any consideration (other than the new share) in exchange for the old share, for the purposes of subsections (2) and (7) the taxpayer is deemed to have disposed of the old share for nil proceeds.

(3) Subsection (1) applies to redemptions, acquisitions and cancellations that occur after 2007.

(4) Subsection (2) is deemed to have come into force on September 29, 2009, except that in its application to an exchange of shares described by subparagraph 87(2)(s)(ii) of the Act, as enacted by subsection 223(8), that occurs before October 31, 2011,

(a) with respect to a new share received on the exchange that has been disposed of before October 31, 2011, paragraph 135.1(10)(a) of the Act, as enacted by subsection (2), is to be read as follows:

(a) the new share issued in exchange for the old share is deemed to have been issued at the time the old share was issued; and

and

(b) paragraph 135.1(10)(b) of the Act, as enacted by subsection (2), is to be read as follows:

(b) for the purposes of subsections (2) and (7) the taxpayer is deemed to have disposed of the old share for nil proceeds.

283. (1) Subsection 136(1) of the Act is replaced by the following:

Cooperative not private corporation

136. (1) Notwithstanding any other provision of this Act, a cooperative corporation that would, if this Act were read without reference to this section, be a private corporation is deemed not to be a private corporation except for the purposes of sections 15.1, 123.4, 125, 125.1, 127, 127.1, 152 and 157, the definition “mark-to-market property” in subsection 142.2(1) and the definition “small business corporation” in subsection 248(1) as it applies for the purpose of paragraph 39(1)(c).

(2) Subsection 136(2) of the Act is amended by striking out “and” at the end of paragraph (b) and by replacing paragraph (c) with the following:

(c) at least 90% of its members are individuals, other cooperative corporations, or corporations or partnerships that carry on the business of farming; and

(d) at least 90% of its shares, if any, are held by members described in paragraph (c) or by trusts governed by registered retirement savings plans, registered retirement income funds, TFSAs or registered education savings plans, the annuitants, holders or subscribers under which are members described in that paragraph.

(3) Subsection (1) applies to the 2001 and subsequent taxation years.

(4) Subsection (2) applies to the 1998 and subsequent taxation years, except that, in its application to taxation years that end before 2009, paragraph 136(2)(d) of the Act, as enacted by subsection (2), is to be read as follows:

(d) at least 90% of its shares, if any, are held by members described in paragraph (c) or by trusts governed by registered retirement savings plans, registered retirement income funds or registered education savings plans, the annuitants or subscribers under which are members described in that paragraph.

284. (1) Paragraph 137(4.3)(a) of the Act is replaced by the following:

(a) the preferred-rate amount of a corporation at the end of a taxation year is an amount equal to the total of its preferred-rate amount at the end of its immediately preceding taxation year and 100/17 of the amount deductible under section 125 from the tax for the year otherwise payable by it under this Part;

(2) The definition “member” in subsection 137(6) of the Act is replaced by the following:

“member”
« membre »

“member”, of a credit union, means

(a) a person who is recorded as a member on the records of the credit union and is entitled to participate in and use the services of the credit union, and

(b) a registered retirement savings plan, a registered retirement income fund, a TFSA or a registered education savings plan, the annuitant, holder or subscriber under which is a person described in paragraph (a).

(3) Subsection 137(7) of the Act is replaced by the following:

Credit union not private corporation

(7) Notwithstanding any other provision of this Act, a credit union that would, if this Act were read without reference to this section, be a private corporation is deemed not to be a private corporation except for the purposes of sections 123.1, 123.4, 125, 127, 127.1, 152 and 157 and the definition “small business corporation” in subsection 248(1) as it applies for the purpose of paragraph 39(1)(c).

(4) Subsection (1) applies to the 2008 and subsequent taxation years, except that, in the application of paragraph 137(4.3) of the Act, as amended by subsection (1), to a particular taxation year of a credit union that began in 2007 and ended in 2008, the preferred-rate amount of the credit union at the end of the particular taxation year is equal to the total of

(a) the preferred-rate amount of the credit union at the end of the taxation year that immediately preceded the particular taxation year; and

(b) the total of

(i) that proportion of the amount obtained by multiplying 25/4 by the amount deductible under section 125 of the Act for the particular taxation year, that the number of days in the particular taxation year that are in 2007 is of the number of days in the particular taxation year, and

(ii) that proportion of the amount obtained by multiplying 100/17 by the amount deductible under section 125 of the Act for the particular taxation year, that the number of days in the particular taxation year that are in 2008 is of the number of days in the particular taxation year.

(5) Subsection (2) applies to the 1996 and subsequent taxation years except that, in its application to taxation years that end before 2009, paragraph (b) of the definition “member” in subsection 137(6) of the Act, as enacted by subsection (2), is to be read as follows:

(b) a registered retirement savings plan, a registered retirement income fund or a registered education savings plan, the annuitant or subscriber under which is a person described in paragraph (a).

(6) Subsection (3) applies to the 2001 and subsequent taxation years.

285. (1) Subsection 137.1(2) of the Act is replaced by the following:

Amounts not included in income

(2) The following amounts shall not be included in computing the income of a deposit insurance corporation for a taxation year:

(a) any premium or assessment received, or receivable, by the corporation in the year from a member institution; and

(b) any amount received by the corporation in the year from another deposit insurance corporation to the extent that that amount can reasonably be considered to have been paid out of amounts referred to in paragraph (a) received by that other deposit insurance corporation in any taxation year.

(2) Subsection 137.1(4) of the Act is amended by striking out “or” at the end of paragraph (c) and by adding the following after paragraph (c):

(d) any amount paid by it to another deposit insurance corporation that is, because of paragraph (2)(b), not included in computing the income of that other deposit insurance corporation; or

(3) Subsections (1) and (2) apply to the 1998 and subsequent taxation years.

286. (1) Subsection 138(2) of the Act is replaced by the following:

Insurer’s income or loss

(2) Notwithstanding any other provision of this Act,

(a) if a life insurer resident in Canada carries on an insurance business in Canada and in a country other than Canada in a taxation year, its income or loss for the year from carrying on an insurance business is the amount of its income or loss for the taxation year from carrying on the insurance business in Canada;

(b) if a life insurer resident in Canada carries on an insurance business in Canada and in a country other than Canada in a taxation year, for greater certainty,

(i) in computing the insurer’s income or loss for the taxation year from the insurance business carried on by it in Canada, no amount is to be included in respect of the insurer’s gross investment revenue for the taxation year derived from property used or held by it in the course of carrying on an insurance business that is not designated insurance property for the taxation year of the insurer, and

(ii) in computing the insurer’s taxable capital gains or allowable capital losses for the taxation year from dispositions of capital property (referred to in this subparagraph as “insurance business property”) that, at the time of the disposition, was used or held by the insurer in the course of carrying on an insurance business,

(A) there is to be included each taxable capital gain or allowable capital loss of the insurer for the taxation year from a disposition in the taxation year of an insurance business property that was a designated insurance property for the taxation year of the insurer, and

(B) there is not to be included any taxable capital gain or allowable capital loss of the insurer for the taxation year from a disposition in the taxation year of an insurance business property that was not a designated insurance property for the taxation year of the insurer;

(c) if a non-resident insurer carries on an insurance business in Canada in a taxation year, its income or loss for the taxation year from carrying on an insurance business is the amount of its income or loss for the taxation year from carrying on the insurance business in Canada; and

(d) if a non-resident insurer carries on an insurance business in Canada in a taxation year,

(i) in computing the non-resident insurer’s income or loss for the taxation year from the insurance business carried on by it in Canada, no amount is to be included in respect of the non-resident insurer’s gross investment revenue for the taxation year derived from property used or held by it in the course of carrying on an insurance business that is not designated insurance property for the taxation year of the non-resident insurer, and

(ii) in computing the non-resident insurer’s taxable capital gains or allowable capital losses for the taxation year from dispositions of capital property (referred to in this subparagraph as “insurance business property”) that, at the time of the disposition, was used or held by the non-resident insurer in the course of carrying on an insurance business,

(A) there is to be included each taxable capital gain or allowable capital loss of the non-resident insurer for the taxation year from a disposition in the taxation year of an insurance business property that was a designated insurance property for the taxation year of the non-resident insurer, and

(B) there is not to be included any taxable capital gain or allowable capital loss of the non-resident insurer for the taxation year from a disposition in the taxation year of an insurance business property that was not a designated insurance property for the taxation year of the non-resident insurer.

(2) Subparagraphs 138(3)(a)(iii) and (iv) of the Act are replaced by the following:

(iii) the amount determined by the following formula:

A – B

where

A is the total of policy dividends (except the portion paid out of segregated funds) that became payable by the insurer after its 1968 taxation year and before the end of the year under its participating life insurance policies, and

B is the total of amounts deductible under this subparagraph (including as determined under subsection (3.1) as it read in its application to the insurer’s last taxation year that began before November 2011) in computing its incomes for taxation years before the year, and

(3) The portion of subsection 138(3) of the Act after paragraph (a) is replaced by the following:

(b) the total of amounts each of which is a policy loan made by the insurer in the year and after 1977; and

(c) the amount of tax under Part XII.3 payable by the insurer in respect of its taxable Canadian life investment income for the year.

(4) Subsection 138(3.1) of the Act is repealed.

(5) Paragraph 138(4)(a) of the Act is replaced by the following:

(a) each amount deducted under paragraph (3)(a), other than under subparagraph (3)(a)(ii.1), (iii) or (v), in computing the insurer’s income for the preceding taxation year;

(6) Subsections 138(4.1) to (4.3) of the Act are repealed.

(7) Paragraph 138(11.5)(j) of the Act is replaced by the following:

(j) for the purpose of determining the income of the transferor and the transferee for their taxation years following their taxation years referred to in paragraph (h), amounts deducted by the transferor as reserves under paragraph (3)(a) (other than under subparagraph (3)(a)(ii.1), (iii) or (v)), paragraphs 20(1)(l) and (l.1) and 20(7)(c) of this Act and section 33 and paragraph 138(3)(c) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, in its taxation year referred to in paragraph (h) in respect of the transferred property referred to in paragraph (b) or the obligations referred to in paragraph (c) are deemed to have been deducted by the transferee, and not the transferor, for its taxation year referred to in paragraph (h),

(8) Paragraph 138(11.5)(k) of the Act is replaced by the following:

(k) for the purposes of this section, sections 12, 12.4, 20, 138.1, 140 and 142, paragraphs 142.4(4)(c) and (d), section 148 and Part XII.3, the transferee is, in its taxation years following its taxation year referred to in paragraph (h), deemed to be the same person as, and a continuation of, the transferor in respect of the business referred to in paragraph (a), the transferred property referred to in paragraph (b) and the obligations referred to in paragraph (c),

(9) Paragraph 138(11.5)(l) of the Act is replaced by the following:

(l) for the purposes of this subsection and subsections (11.7) and (11.9), the fair market value of consideration received by the transferor from the transferee in respect of the assumption or reinsurance of a particular obligation referred to in paragraph (c) is deemed to be the total of the amounts deducted by the transferor as a reserve under paragraph (3)(a) (other than under subparagraph (3)(a)(ii.1), (iii) or (v)) and paragraph 20(7)(c) in its taxation year referred to in paragraph (h) in respect of the particular obligation, and

(10) Paragraph 138(11.91)(d) of the Act is replaced by the following:

(d) for the purposes of paragraph (4)(a), subsection (9), the definition “designated insurance property” in subsection (12) and paragraphs 12(1)(d) and (e), the insurer is deemed to have carried on the business in Canada in that preceding year and to have claimed the maximum amounts to which it would have been entitled under paragraphs (3)(a) (other than under subparagraph (3)(a)(ii.1), (iii) or (v)), 20(1)(l) and (l.1) and 20(7)(c) for that year,

(11) Paragraph 138(11.91)(d) of the French version of the Act is repealed.

(12) Subsection 138(11.91) of the English version of the Act is amended by adding “and” at the end of paragraph (d.1), by striking out “and” at the end of paragraph (e) and by repealing paragraph (f).

(13) The portion of paragraph 138(11.94)(b) of the Act after subparagraph (ii) is replaced by the following:

to a corporation resident in Canada (in this subsection referred to as the “transferee”) that is a qualified related corporation (within the meaning assigned by subsection 219(8)) of the transferor that, immediately after that time, began to carry on that insurance business in Canada for consideration that includes shares of the capital stock of the transferee,

(14) The definitions “1975 branch accounting election deficiency”,“1975-76 excess additional group term reserve”,“1975-76 excess capital cost allowance”, “1975-76 excess investment reserve”, “1975-76 excess policy dividend deduction”, “1975-76 excess policy dividend reserve” and “1975-76 excess policy reserves” in subsection 138(12) of the Act are repealed.

(15) The formula “(A + B + C) – (D + E + F + G + H)” in the definition “surplus funds derived from operations” in subsection 138(12) of the Act is replaced by the following:

(A + B + C) – (D + E + F + G)

(16) The description of B in the definition “surplus funds derived from operations” in subsection 138(12) of the Act is replaced by the following:

B is the total of all amounts each of which is a portion of a non-capital loss that was deemed by subsection 111(7.1) as it read in its application to the 1976 taxation year to have been deductible in computing the insurer’s income for a taxation year that ended before 1977,

(17) The definition “surplus funds derived from operations” in subsection 138(12) of the Act is amended by adding “and” at the end of the description of F, by striking out “and” at the end of the description of G and by repealing the description of H.

(18) The definition “transition year” in subsection 138(12) of the Act is amended by striking out “and” at the end of paragraph (a), by adding “and” at the end of paragraph (b) and by adding the following after paragraph (b):

(c) in respect of the amendment to paragraph 1406(b) of the Income Tax Regulations effective as of the life insurer’s 2012 taxation year, the life insurer’s 2012 taxation year;

(19) Section 138 of the Act is amended by adding the following after subsection (25):

Policy reserve transition — application rules

(26) In applying subsections (16), (17), (18) and (19) to a life insurer for a taxation year of the life insurer,

(a) if the application of one or more of those subsections is in respect of the amendment to paragraph 1406(b) of the Income Tax Regulations effective as of the life insurer’s 2012 taxation year, the life insurer’s reserve transition amount for its transition year in respect of that amendment is to be determined as though the description of A in the definition “reserve transition amount” in subsection (12) read as follows:

A is the maximum amount that the life insurer would be permitted to claim under subparagraph (3)(a)(i) (and that would be prescribed by section 1404 of the Income Tax Regulations for the purposes of subparagraph (3)(a)(i)) as a policy reserve for its base year in respect of its life insurance policies in Canada if paragraph 1406(b) of the Income Tax Regulations were read as it applies to the life insurer’s 2012 taxation year, and;

(b) if one or more of those subsections applies in the same taxation year in respect of both the amendment to paragraph 1406(b) of the Income Tax Regulations effective as of the life insurer’s 2012 taxation year, and the International Financial Reporting Standards adopted by the Accounting Standards Board and effective as of January 1, 2011, then, for the purposes of applying those subsections in respect of a transition year described by paragraph (b) of the definition “transition year” in subsection (12), the reference to “as it reads in respect of its transition year” in paragraph (b) of the description of A in the definition “reserve transition amount” in subsection (12) is to be read as a reference to “as it reads in respect of its transition year (determined without reference to the amendment to paragraph 1406(b) of the Income Tax Regulations effective as of the life insurer’s 2012 taxation year); and

(i) for each transition year, the computation of the reserve transition amount for the transition year, and the requirements to include, or rights to deduct, under any of those subsections an amount in respect of that reserve transition amount, shall be determined as if that transition year were the only transition year of the life insurer for that taxation year, and

(ii) for greater certainty, the references in subsections (16), (17), (18) and (19) to a transition year include each of those transition years.

(20) Subsections (1), (11) and (12) apply to taxation years that end after 1999.

(21) Subsections (2) to (10) and (14) to (17) apply to taxation years that begin after October 31, 2011.

(22) Subsection (13) applies to transfers made after October 2004.

(23) Subsections (18) and (19) apply to the 2012 and subsequent taxation years.

287. (1) Subsections 138.1(3.1) and (3.2) of the Act are repealed.

(2) Subsection (1) applies to taxation years that begin after October 31, 2011.

288. (1) Subsections 142.5(4) to (7) of the Act are repealed.

(2) Subsection (1) applies to taxation years that begin after October 31, 2011.

289. (1) Paragraph 142.6(1)(b) of the Act is replaced by the following:

(b) if the taxpayer becomes a financial institution, the taxpayer is deemed to have disposed, immediately before the end of its particular taxation year that ends immediately before the particular time, of each of the following properties held by the taxpayer for proceeds equal to the property’s fair market value at the time of that disposition:

(i) a specified debt obligation, or

(ii) a mark-to-market property of the taxpayer for the particular taxation year or for the taxpayer’s taxation year that includes the particular time;

(2) Paragraph 142.6(1)(d) of the Act is replaced by the following:

(d) the taxpayer is deemed to have reacquired, at the end of its taxation year that ends immediately before the particular time, each property deemed by paragraph (b) or (c) to have been disposed of by the taxpayer, at a cost equal to the proceeds of disposition of the property.

(3) Subsections (1) and (2) apply to taxation years that end after 1998.

290. (1) Subsection 142.7(8) of the Act is amended by adding the following after paragraph (a):

(a.1) for the purpose of applying subparagraph 212(1)(b)(vii) in respect of the debt obligation, the obligation is deemed to have been issued by the entrant bank at the time that the obligation was issued by the Canadian affiliate;

(2) Paragraph 142.7(8)(a.1) of the Act, as enacted by subsection (1), is repealed.

(3) Subsection (1) is deemed to have come into force on June 28, 1999.

(4) Subsection (2) is deemed to have come into force on January 1, 2008.

291. (1) The portion of subsection 143(3.1) of the Act before the description of B in paragraph (b) is replaced by the following:

Election in respect of gifts

(3.1) For the purposes of section 118.1, if the eligible amount of a gift made in a taxation year by an inter vivos trust referred to in subsection (1) in respect of a congregation would, but for this subsection, be included in the total charitable gifts, total Crown gifts, total cultural gifts or total ecological gifts of the trust for the year and the trust so elects in its return of income under this Part for the year,

(a) the trust is deemed not to have made the gift; and

(b) each participating member of the congregation is deemed to have made, in the year, such a gift the eligible amount of which is the amount determined by the formula

A × B/C

where

A is the eligible amount of the gift made by the trust,

(2) Subsection (1) applies to gifts made after December 20, 2002.

292. (1) The heading before section 143.2 of the Act is replaced by the following: